TDS on charges towards coordination & procurring permissions

[Sanjay Lakhotia]

We have hired an agency who provide services related to procuring various licenses/permissions (Local police NOC/IPRS/Novex etc) for an event. Can anybody pls advise TDS on such services?

About Agency:

Agency is a leading licensing agency specializing in event operational licenses.Their team of experts ensures that our events comply with all necessary regulations, delivering a seamless and stress-free experience.

[YAGAY andSUN]

For the services provided by the agency related to procuring licenses/permissions (like Local Police NOC, IPRS, Novex, etc.), the TDS (Tax Deducted at Source) provisions would depend on the nature of the services and the applicable section of the Income Tax Act.

Here’s the breakdown:

1. Nature of Service:

The services you are receiving from the agency appear to be professional or technical services, specifically in the area of obtaining various licenses and permissions. These services are likely to fall under "Contractual Services" or "Professional Services".

2. TDS Rate and Applicable Section:

Based on the nature of the service, the applicable TDS provisions can be as follows:

• Section 194J (Professional or Technical Services):
  If the services provided by the agency are professional or technical in nature, TDS under Section 194J would apply. The rate for TDS under Section 194J is generally 10% for payments to residents (subject to the applicable provisions).
• Section 194C (Contractual Payments):
  If the services are considered contractual in nature (and not professional or technical), then TDS under Section 194C could apply, which is typically at a rate of 1% for individuals and HUFs and 2% for others (such as a company).

3. Threshold Limit:

• Section 194J: TDS under this section applies when the payment to the agency exceeds ₹30,000 in a financial year.
• Section 194C: TDS under this section is applicable when the aggregate amount of payment during the financial year exceeds ₹30,000 (for a single contract) or ₹1,00,000 (for multiple contracts).

4. GST Consideration:

The payment made to the agency will likely attract GST (Goods and Services Tax) under the reverse charge mechanism or forward charge, depending on the specifics of the service. TDS is calculated on the gross amount including the GST component, as TDS applies to the total consideration paid.

Conclusion:

Based on the nature of the services (licensing, permissions, etc.), TDS under Section 194J (Professional or Technical Services) is most likely to apply at a rate of 10%, assuming the payment exceeds the threshold. However, if the services are categorized as contractual, then Section 194C would apply with a lower rate of 1% or 2%, depending on the recipient entity.

Make sure to check if there are any specific exemptions, and you may also consult with a tax professional for precise application, as the classification of services can vary depending on the specific nature of the agreement.

*** 

[Manish Kumar]

The charges can be treated as 'professional fee' covered for TDS u/s 194J at the rate of 10%.

[Ramanathan Seshan]

Dear Sanjay-sir,

Under the Income Tax Act, the term "professional services" refers to services provided by individuals engaged in professions such as legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising, or any other profession notified by the Board under section 44AA.

So, if the team of experts in question consists of legal professionals, then TDS should ideally be deducted under section 194J. However, if the services do not fall under the definition of professional services (e.g., general contractual work), then section 194C would be applicable.

Regards,

S Ram

AI Summary

Agency Licensing Services Trigger 10% TDS Under Section 194J When Annual Payments Exceed Rs. 30,000 A company sought advice on Tax Deducted at Source (TDS) for an agency providing event licensing and permission services. Responses indicated that TDS likely applies under Section 194J for professional services at 10% rate, with applicability dependent on payment exceeding Rs. 30,000 annually. Experts recommended verifying service classification and consulting a tax professional for precise interpretation.