Income tax or TCS applicable sponsor tours

Hi Hemendra! Here’s a quick take on your situation with Maruti sponsoring foreign tours and conferences for dealers:

Income Tax Aspect:

• If Maruti is directly bearing the expenses for foreign tours and conferences on behalf of dealers, then usually this is treated as a business promotion expense for Maruti.

• For the dealer (you), if you don’t receive any amount or reimbursement and Maruti pays directly, generally no income arises for the dealer as per IT laws.

• However, if Maruti provides any benefit to dealers (like sponsoring their travel), it may be treated as a perquisite or taxable income in the hands of the dealer depending on the nature and relationship.

TCS (Tax Collected at Source):

• As per Section 206C(1H), TCS is applicable on sale of goods over ₹50 lakh by a dealer.

• Sponsorship or expenses borne by Maruti are not considered sale proceeds to the dealer, so TCS on such sponsorship is not applicable.

• But, if Maruti recovers the expenses from dealers or it is treated as sale consideration, then TCS rules may apply.

Practical Pointers:

• Check the agreement if Maruti recovers any amount from dealers.

• Ensure documentation clarifies the sponsorship as business promotion.

• Consult your CA for structuring and reporting.