TDS on Association Subscription 194C vs 194J

There are opposite views of Professionals on the matter of TDS on subscripttions to Associations, like CII, PHDCII, FICCI, IamSME of India, Nasscom etc. After detailed delibration, I have come to following opinion. I have tried to support it with clear excerpts from the Income Tax Act.

Please review and advise. Let us make a final opinion.

Title = TDS on membership subscripttion to Industrial Associations

Short answer = Yes, it is possible, but which section and what rate, It depends on the nature of service being given by them to us.

Explaination

Let us see what the law says

TDS u/s. 194J ( 10% ) that is deduct TDS as professional or technical service

1. Part A : This is applicable for “Professional Services” As per section 194J, “professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified87 by the Board for the purposes of section 44AA or of this section;

2. Part B : This is applicable for “Technical Services” also . That is given in Section 9(1) vii – explaination 2 —For the purposes of this clause, “fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) …..”

TDS u/s. 194C ( 2% ) that is deduct TDS as a Contractor

Payments to contractors is covered in Section 194C, and the law clearly says

194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor ) for carrying out any work48 (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to—

a. one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;

b. two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein.

Based on this the following examples can be discussed

For sake of ease, I have mentioned “Association” as FICCI

Examples of 10% :

a) FICCI Bill for Energy Audit = Technical service = Yes, hence TDS yes, at 10%

b) FICCI Bill in cluster scheme for ISO Audit = this is related to Managerial and Technical service = Yes, hence TDS yes, at 10%

c) FICCI cluster gives legal advice to a member for legal case against HUDA for EDC case = 10% TDS

Examples of NIL % :

d) FICCI asks member to give Rs 40000 billed as donation = TDS is NIL

Examples of 2 % :

e) FICCI charge for Exhibition stall = Business service, in form of work = Yes, hence TDS yes, at 2%

f) FICCI Bill for Advertisement in a Souvenir = Advertisement service part of 194C= Yes, hence TDS yes, at 2%

g) FICCI Bill for Food coupons in a Diwali or New Year Fair = Catering service part of 194C= Yes, hence TDS yes, at 2%

Question of “Subscripttion”, it depends on

· FICCI asks member to give Rs 40000 for yearly subscripttion . and this is for the managerial, technical or consultancy services, technical seminars during the year, then TDS 10% ( note, if the Technical portion is more, than it must be 10% )

· FICCI asks member to give Rs 40000 for yearly subscripttion . if we this is billed as donation = NIL

· FICCI asks member to give Rs 40000 for yearly subscripttion . and this is for the parties and food during the year, then TDS 2%

Question of amount

3. Professional / Technical TDS = limit is Rs 30000 a year

4. Contractor TDS = limit is Rs 30000 a bill, and Rs 75000 a year ( both to be followed )

What if we still don’t deduct TDS ?

Consequences of Non deduction, late deduction and Late deposit of Tax deducted at sources (TDS)

Non deduction, late deduction and Late deposit of Tax deducted at sources (TDS) may lead you to face following consequences.

· A: Interest on late deduction /deposit of Tax at source.

· B : Dis-allowance of Exp , on which tax has not been deducted /deposited u/s 40(a)(ia)

· C: Penalty and prosecution.(271C and 276B)

So, if the officer takes a plea that TDS was deductible and we did not do it, he can safely disallow the same, and we end up paying 33% approximate as tax and then interest and penalty on that. So, taking risk on this matter is not advised.

Settled practice:

• Annual membership or subscripttion fees to CII, FICCI, NASSCOM, chambers or industry associations: no TDS. A subscripttion is not consideration for any specific service, and is not "work", professional or technical fees, rent or commission. There is no residuary TDS section.

• Separate, identifiable services billed by the association attract TDS by nature:

– training, seminar or course participation fees: 194J (professional or technical, depending on content) or 194C (event or contract) as the case may be

– a lawyer's fee pooled and recharged by the association: 194J at 10% if the association is merely reimbursing a professional engaged for members

– hall or stall charges: 194C or 194I.

• Thresholds: 194J Rs 50,000 a year; 194C Rs 30,000 per bill or Rs 1 lakh a year (from 1 April 2025).

• GST: membership fees of trade associations are taxable at 18% (the mutuality exemption for clubs was not restored for associations). ITC is allowed, since Sec 17(5)(b)(ii) blocks only clubs and health or fitness centres.

• From 1 April 2026: Sec 393 of the Income-tax Act, 2025.