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TDS on incentive

sanjeevmehra (individual) (51 Points)

23 September 2011

WHAT IS THE MEANING OF INCENIVE,

BIG HOUSE COMPANIES WHEN GIVES SALES INCENTIVE TO ITS DISTRIBUTERS WHY NOT DEDUCT TDS ON IT

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12 Replies

C.A SHASHANK GOYAL (Chartered Accountant) (362 Points)
Replied 23 September 2011

Sir , It depends if for example insurance commission is being paid there is special section for deduction of Tds , If the commission is on sales of lottery tickets then there is also a special provision , .Incentive means extra payment over and above the basic pay , that may be based on performance or fixed .And yes tds is also required to be deducted on these incentives if the payment made is by virtue of employer and employee relationship i.e payment is taxable under the head salary .

valji (Accounts manager-MBA) (2150 Points)
Replied 23 September 2011

agreee with above

surender (Manager Accounts) (149 Points)
Replied 23 September 2011

it comes under Salary .if the incentive payment made by employer to employee relationship.

Mihir (Wealth Manager) (5293 Points)
Replied 23 September 2011

TDS should be deducted from incentive.

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 23 September 2011

Right said by above....

Rup Kumar (finance manager) (288 Points)
Replied 24 September 2011

It shall be trated as salary & TDS will be deducted as per section 192 of the income tax act.

CMA Y Srinu (Asst. Manager - Finance) (35 Points)
Replied 26 September 2011

Dear All,

Agreed with the above clarification.

If incentive given to a person(other than an employee) by the company where ther is no existence of employee and employer relationship.

In the above case whether TDS is apllicable? If applicable under what section?

Give me clarification with respect to any case laws / Provisions?

Thanks & Regards,

Y.Srinu

pankaj (Accountant) (23 Points)
Replied 19 December 2012

How much deduct tds in incentive

Vinay kumar.k (Executive Accountant) (24 Points)
Replied 09 December 2015

Sales incentive paid to the dealers is not liable to TDS under section 194H

Facts and issue: The assessee was a distributor of M/s. Sheela Foam Pvt. Ltd (‘SFPL’) for the state of Gujarat. SFPL was selling the goods to the assessee, who in turn was selling goods to the authorized dealers appointed by SFPL. The assessee had paid sales incentive to the dealers of SFPL on the basis of their performance and achievement of the sale target. Various dealers were given sales target and percentage of incentive was given on the basis of their performance/achievement of the sale target given to them. The AO treated the sales incentive paid as ‘commission’, liable to TDS under section 194H of the Act. As the assessee had not deducted any TDS, the AO made disallowance of Rs. 2.46 Crore under section 40(a)(ia) of the Act for non-deduction of TDS. The CIT(A) relied on the decision of the Bombay High Court rendered in the case of CIT vs. Intervet India Pvt. Ltd. (ITA No.1616 of 2011) and decided the issue in favour of the assessee.

Decision: The Tribunal upheld the observation of the CIT(A) that section 194H of the Act read with the Explanation makes it clear that the same shall become applicable, when the payment is received by a person who is acting on behalf of another or acting as an agent of another person. In the given case, the sales incentive was paid to the dealer based on their performance and achievement. The same cannot be equated with “commission”. The AO was therefore not justified in treating the payment of incentives to the dealers as well as to another distributor, as payment of commission liable to TDS under section 194H of the Act. Provision of section 194H are not at all applicable on the facts of the case.

Citation: Bombay Sales Corporation vs. DCIT [ITA No.2433/Ahd/2013 and ITA No.2553/Ahd/2013]