Music Academy, as per its rules, pays a fixed honorarium per concert to each musician performing in the concerts organised by it. Hari, a violinist, however, refuses to accept this sum. If he requests Music Academy to pay such sum directly to Aid Us, an unregistered institution providing relief to the poor and needy in rural India, what would be the tax consequence?
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Tax on fixed honorarium
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If the violinist has a pre-existing, legally binding obligation to divert the payment to the institution before it accrues to him, it may be treated as a diversion of income by overriding title and not taxable in his hands. If he earns the income and then chooses to redirect it, it remains taxable as his income, and he would need to explore donation tax deductions under the applicable sections.
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