Tds help

On Rs. 1,00,000 since the Director is raising the bill for only Rs. 1,00,000

TDS u/s 194J is to be deducuted on payment of professional services of Rs.112360/- (Inclusive of ST).

The journal entry will be as follows:

a) Professional fees A/c Dr. 1,00,000

               To TDS Payable A/c               10,000

               To Director A/c                         90,000

b) Service tax expense A/c  Dr.  12,360

              To Service tax payable(Reverse charge) A/c   12,360

Section 194J states that the TDS shall be decuted on the amount payable to Vendor by way of professional fees.

In case, the director charges Rs. 12360 on invoice itself, then the TDS shall be deducted on amount inclusive of service tax.

However, in case of reverse charge, the amount of service tax is to be paid by the service receiver to the govt ( and not to the Party who has raised the bill).

Hence in case of reverse charge, the TDS u/s 194J shall be deducted on the amount exclusive of Service tax.

The liability to pay service tax under reverse charge is of recipient of service in case of directors services renderd  the whole liability (Rs. 12360/-) should be paid by the company to Govt. and TDS is required to deduct excluding service tax portion.

The other things are,

1. Service tax will apply only in case of non employee directors.

2 If the liability to make the payment to the Director is recognized after 7th August 2012,reverse charge will apply and if such liability is recognized by the company before 7th August 2012, reverse charge will not apply.

TDS should be deducted on payment made to director and service tax is not paid to director.

The service tax is borne and directly paid to govt by the receiver therefore no need of dedcuting tds on the service tax paid by the receiver.

Sec 194J(1)(ba) :- Any remuneration or commission paid to director of the company.

Under reverse mechanism 2012, service provided by directors of companies will be liable for service tax provided the service turnover has exceeded the threshold exemption limit in their individual case. Service provided. With the introduction of reverse charge mechanism w.e.f. 01.08.2012 and 06.08.2012 under guidance section 67 of the Finance Act read with ST Valuation Rule 2006 does not change or alter the provisions of TDS Provisions under Income Tax Act.1962 so far.

As per the existing TDS provisions on professional payments, TDS is to be deducted on total professional fees along with the Service tax portion.

Only TDS U/s 194I ie. TDS on Rent, wherein ST is not to be included as per specific notification.

Dear Subhash, the provisions for including the service tax for the purpose of deducting TDS consider only those situations in which the amount has been charged by the Vendor ,,....and not the cases in which the Service tax is payable by the service receiver(i.e. reverse charge)

Agreed with Sumit

I do agree partly with Sumit in respect of TDS deduction by any person not being an individual or a HUF who is responsible for paying to a resident by way of fees for professional or technical services royalty and any sum referred to clause (va) of section 28 is liable to deduct tax at source in case aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year.

As the transactions of Directors professional servicesre, ST under reverse mechanism and liability of service receiver i.r.o. service tax and TDS provisions are all inter linked and same can not be taken seperately. There is still ambiguity in TDS provisions when the reverse charge mechanism are applicable as there is no specific clarifications from CBDT so far.

It is safer side to deduct TDS on on professional payments including ST until clear clarifications from IT Dept.

Dear Ganeshan

Sumit is absolutely correct.

Dear Sumit

Please go through the explanations given for the purpose of the Sec-194J of the IT Act. The extract is as follows.

 where any sum referred to in sub-section (1) is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly.

SSSo TDS under the Sec-194J shall be deducted on the whole amount inclusive of service tax portion.

S

Hi,

As per existing and new provision (reverse charge) service tax amt will be ultimatelly remmitted to the department in both the cases. So i feel creteria for deduction of Income tax at source will not change i.e as per existing provision. Hence TDS is to be deducted inclusive of Service Tax