TDS applicability- 194H or 194J

[Prerna Birla]

Whether an amount charged on profits made by managing portfolio of an individual will be referred to as professional services or commission/brokerage for the purpose of TDS deduction?

[Padmanathan KV]

Prerna Ma'am,

1. Section 194H not applicable:

(i) "commission or brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities;

DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-6, KOLKATA VERSUS NOBLE ENCLAVE & TOWERS (P.) LTD. 2011 (11) TMI 454 - ITAT KOLKATA

2. Applicability of 194J:

Tribunals have held that TDS u/s 194J is also not applicable on portfolio management fee

Hiren Valves Pvt Ltd  - 2014 (9) TMI 1275 - ITAT AHMEDABAD

Taraben Jayantibhai vs ITO - 2015 (10) TMI 2844 - ITAT AHMEDABAD

These are only some of the decisions which reflects the views in this aspect and should not be taken as final inference. At best, they will serve in defending a case if TDS is not deducted. However, the decision to deduct TDS or not should be taken based on facts and circumstances. A conservative approach will be to treat it as fee for technical service and deduct TDS u/s 194J.

AI Summary

TDS on portfolio management fees: classification determines applicability, assess facts before deciding on tax deduction. Portfolio management fees may not qualify as commission or brokerage because the commission definition excludes securities-related transactions; tribunals have similarly questioned applicability of routine professional-fee provisions to such fees. Determination is fact-sensitive: tribunal decisions can support non-deduction but a conservative approach treats these receipts as technical/professional fees and recommends TDS deduction unless facts indicate otherwise.