TDS on audit fees

TDS to be deducted on amount including service tax

TDS had to be deducted on the service tax component is well....

Only in the case of rent income tds is not to be deducted on service tax otherwise in every case tds is to be deducted on gross amount.

I am agree with Shubham

See first of all the section says any sum paid by way of fees for professional services and also a person went in RTI with the Income Tax department on the above issue, the answer he got was that TDS to be deducted on amount inclusive of Service Tax. The same is attached herewith for your reference.

Though i personally do not endorse the view but that is how the law is.

And the same is not applicable for service tax on rent as there is a specific circular for the same.

There is no logic for deducting the TDS on service tax component.

In its circular, board has clarified that tax deduction at source under section 194-I of the Income Tax Act, would be required to be made on the amount of rent paid/payable without including the service tax. (Cicular No. 4 dated 28-04-2008). Reason given by CBDT in this circular that service provider only acts as a collection agent for the government.

After ths clarification, every body was of the view that the principal enunciated by ths circular is applicable to all the payments made by the assessee and accordingly no TDS is deductible from on the part of service tax whether it is professional's bill or contractor's bill. But, to settle the issue, CBDT has issued another clarificatin vide circular F no. 275/73/2007IT(B) dated 30-06-2008 can not be extended to the payment made under section 194-J (Fees for professional and technical services). Therefore, TDS is to be deducted on the gross amount inclusive of service tax where the payment is being made u/s 194-J.

From the reading of both the clarifications, the reasons for two stands in two situtations can be discussed as under :-

CBDT has given clarification on the matter by issuing circular stating that u/s 194-I TDS is deductible only on the rental income & not on service tax (circular no. 4 dated 28-04-2008) and u/s 194-J TDS is deductible on gross amount i.e. inclusive of service tax. (Dated 30-06-2008). The reason given by CBDT are that provisions of section 194-I requiers deduction of tax at sources on "any income by way of rent", whereas provisions of section 194-J requires deduction of tax at sources on "any sum payable" by way of professional fee, for technical services, royalty & non compete fee.

CBDT states that as 194-I requires deduction on income & service tax does not form part of income, thus TDS is not deductible on TDS. While in case of 194-J CBDT lays stress on "any sum payable" & forgets the part "by way of professional fee, fee for technical services, royalty & non compete fee." Now, Service tax does not form part of professional fee, it is over and above the professional fee which the service provider has to collect from the service recipient & pay to government. Thus it is not part of "any sum payable by way of professional fee".

From the above discussion I think that TDS should not be deducted on service tax component.

The following reasons for this are as under :

1. The money collected (by way of service tax) is instantly diverted by over-riding title. 2. If we read basic charging section of TDS (Section 190), it requires the deduction of tax on income of the recipient. (service tax is not the income as accepted by the CBDT).

3. If CBDT accept in their circular that service provider only acts as a collection agency. Then why not for professional service provider is a collecting agency of government for the purposes of section 194-J, they only stress on the wordings of section 194-J, this is not a true law and has to be amended by finance ministry department.

Regards

Rajat

TDs is to be deducted on Gross Amount as the Circular mentioned above is specifically and exclusively for Section 194I.

Originally posted by : joji jose
	dear sirs,  our chartered accountant  had  given to our company a audit fee bill amouting to Rs. 25000 + service tax . We said them that we have to deduct TDS on the gross amount (i.e including service tax) , but said that we have to deduct TDS on 25000 only because they are  collecting and paying service tax , it was only a statutory obligation, so we are not deducted TDS on the gross amount , only for the professional charges. Is it correct. whether their argument is correct. please guide us in this case

 Tax is to be deducted on gross amount.

Including service Tax

dear sir

deducting the tds is compuslory for Rs.20000 and above TDS deduct as per Section 194J whatever amount is raised in bill you should deduct the tds

only in case  of rent  Tds is deducted exclusive of service tax and not on others

TDS TO BE DEDUCTED INCLUSIVE OF SERVICE TAX.........ONLY IN CASE OF RENT TDS TO BE DEDUCTED ON BASIC AMT......(EXCLUSIVE OF SERVICE TAX COMPONENT)

There is a current circular on this matter issued by the CBDT (Central Board for Direct Taxes).In this circular, board has clarified that tax deduction at source (TDS) under sections 194-I of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service tax. [Circular no. 4 dated 28-4-2008] After this clarification, every body was of the view that the principle enunciated by this circular is applicable to all the payments made by the assessee and accordingly no TDS is deductible from on the part of service tax whether it is professional's bill or contractor's bill. But, to settle the issue, CBDT has issued another clarification vide circular F. NO. 275/73/2007IT(B) dated 30-6-2008. In circular CBDT has clarified that the scope of benefit of Circular no. 4 dated 28-4-2008 can not be extended to the payment made under section 194J (Fees for professional and technical services).

Therefore, TDS is to be deducted on the gross amount inclusive of service tax where the payment is being made u/s 194J.

Hope u got ur answer.