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TDS on professional services u/s 194j

Rahul Gupta (Chartered Accountant) (644 Points)

27 October 2011

I want to clarify the situation like wise i am enjoying the professional services for which the bill raised to me is amounting to1 Lac +10.3% Service Tax with a total of110300/-

As per Section 194J i must deduct TDS @ 10%. According to me i must deduct tax on1 Lac only and not the total bill amount as TDS on Service Tax is not appropriate. The basic rule is to deduct tax on income or revenue of the other person while Service Tax is not the Revenue for that professional.

But in my recent post of TDS on Rent somebody has posted that TDS must include the Service Tax value i.e. it must be charged on the whole bill amount.

Please clarify me that whether the TDS is to be charged on100000/- Lac (Professional Fees) or on110300/- (Professional Fess + Service Tax)

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16 Replies

ashish gupta ( student) (1922 Points)
Replied 27 October 2011

on Rs.110300 i.e. including service tax amount.

It is only in the case of Rent where tds is to be deducted on the amount excluding service tax.

Shah Tarun (Student) (800 Points)
Replied 27 October 2011

It will be on 1,10,300 and not on 1,oo,ooo.

Sharad Suman Das (art) (141 Points)
Replied 27 October 2011

dear rahul,

in your current case tha TDS will be calculated on the thr Amt of 1,11,300.00 only in case of rent it will be on amt excluding service tax

Kunal (Risk Analyst) (299 Points)
Replied 27 October 2011

Well in case of rent the text in ITA is 'any INCOME' paid to any person...so now ST is NOT income so we exclude ST while leving TDS...whereas in case of profsnl services the text is 'any SUM' paid to any person....'any SUM' includes ST...dats y we deduct TDS inclusive of ST. i hope it wil make things clear for u. Take care :)

4 Like

Rahul Gupta (Chartered Accountant) (644 Points)
Replied 27 October 2011

Thanks to all for clarifying me

@ roopak thanks for giving the clear - cut solution

Rahul (CA Practice ) (1818 Points)
Replied 27 October 2011

Except section 194I, TDS on Rent , TDS is deducted inclusive of service tax.

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 27 October 2011

RULE :- TDS IS TO BE DEDUCTED ON WHOLE AMOUNT,INCLUDING AMOUNT OF SERVICE TAX...ie..110300

EXCEPTION, RENT OF HOUSE PROPERTY..

CA Amandeep singh (na) (45 Points)
Replied 27 October 2011

tds is to be deducted on total amt ie inclusive of service tax (110300) however in case of rent it is to be charged on excluding service tax.

M. Lapsiwala (CA) (38 Points)
Replied 28 October 2011

Dear Rahul,

I agree with your view that TDS should be deducted only on the amount of fees and not on the Service Tax billed.

Section 194J reads as follows:

"194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of—

(a) fees for professional services, or

(b) fees for technical services, ⁵³[or]

⁵³[(c) royalty, or

(d) any sum referred to in clause (va) of section 28,]

shall, at the time of credit of such sum to the account of the payee 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 ⁵⁴[ten] per cent of such sum as income-tax on income comprised therein :"

This is followed by provisos.

I am of the opinion that Service Tax is neither "Fees" for professional services nor is it "Fees" for technicical services. Further, Service Tax is niether royalty nor does it attract the provisions of Sec. 28 (va). Hence there is no liability on any assessee to deduct TDS on the Service Tax amount.

I have been following this for a number of years without any problems.

Hope this helps.

vivek tapadia (Partner) (85 Points)
Replied 28 October 2011

on 111300 only in case of 194i rent ST is not comsidered

CMA Vijay (Manager) (31 Points)
Replied 29 October 2011

I am in agreement with the views expressed by CA M. Lapsiwala. In my previous organisation i also used to follow the practice of not deducting the TDS on service tax payable to the professionals.

But the fact is in general very few follow this practice and charge the TDS on amount including ST. The payees also accept the same as they get the deduction certificate from the payer.

In fact the IT department should have come with the clarification on this issue as it is a classic case of cascading effect of taxation rules.

Narayanan G (Finance Officer) (24 Points)
Replied 29 October 2011

Hi,

It should be calculated on 110300.00, because as per IT Act only for tds on rent (194I) is calculated on the amount excluding service tax.So you need to calculate tds on professional charges(194J) on amount 110300

CMA Riju Puthalath (Senior Manager) (21 Points)
Replied 29 October 2011

TDs Shold dededuct on full amount, ie, Rs.110300

Dev K Sharma (Learning Thru Experience) (157 Points)
Replied 29 October 2011

First of all the second para you wrote that tds will be deducted on rent including service tax is not correct tds will be deducted on Rent crossing threhold limit of 180000/- excluding Service tax @ 10%.

In the case of 94J TDS Will be deducted on Bill amount including Service Tax.