Clarification - 'Professional fees', 'Technical fees' & 'HonorariumFees'

[DEVKUMAR KOTHARI]

'professional fees', 'technical fees' are different from honorarium. Fees is for services renderd on request and authorization by the client. It is decided mutually. Honorarium is not for any services renderd on request and authorization to do work or as per agreement. In case of work done on honorary basis, the work is generally doen voluntarily and not after negotiation or as per agreement. The honorarium is not mutually decided. Honorarium is not compulsory, it is optional and decided by the person who use the material or service provided by the other person. It is paid as an honor or regard and not as consideration for service or goods, provided voluntarily. Therefore, honorarium to say author of articles, is not in nature of porfessional or technical fees to which provisions of Section 194J apply. However, as usual tax authorites may raise dispute, demand that tax should have been deducted and deposited. If the requirement is not complied with honorairum may be disallowed u/s Sec 40(a)(ia). In case of regular authors, the A.O. can consider that there is some sort of understanding between the publisher, website and author/ contributor. Therefore, to play safe tax may be deducted from honorarium, wherever applicable, considering honorarium as fees for professional or technical services. The deduction may be without prejudice and to avoid disputes, so that the A.O. does not claim that in earelier years tax was not deducted and there was default. Readers and particularly authors who receive honorarium are requested to send their views with other supporting material.

AI Summary

Clarifying Differences: Professional vs. Technical Fees vs. Honorarium; Tax Implications Under Sections 194J and 40(a)(ia). The discussion clarifies the distinction between 'professional fees,' 'technical fees,' and 'honorarium.' Professional and technical fees are payments for services rendered under mutual agreement, while honorarium is a voluntary payment not based on an agreement, often given as a gesture of respect. It is not subject to the same tax provisions as professional fees under Section 194J. However, tax authorities may dispute this, potentially disallowing honorarium under Section 40(a)(ia) if tax is not deducted. To avoid disputes, it is suggested to deduct tax on honorarium as a precaution. Participants are encouraged to share their views on this matter.