Honorarium vs Professional Fees

[DEVKUMAR KOTHARI]

HONORARIUM VIS A VIS PROFESSIONAL FEES -REVISED ISSUE TO SEEK MORE VIEWS Fees is for services renderd on request and authorization by the client. It is decided mutually. On other hand honorarium is not for any services renderd on request and authorization to do work or as per agreement- the work as well as honorarium both are voulntarily. An author submit article without any obligation, the same may be published or not.The publisher may or may not pay honorarium even after publication of article.The honorarium is not mutually decided. It is paid as an honor or regard and not as consideration for service or goods, provided voluntarily. Therefore, honorarium e.g. to author of articles, is not in nature of porfessional or technical fees to which provisions of Section 194J apply. Honorarium is generally very small amount considering rate of professional fees for such work honorarium is a fraction of usual fees ranging between 5-25% of usual fees, depending on stature of the author.Thus, honorarium cannot be regardes as professional fees by any count. However, as usual tax authorites may raise dispute, demand that tax should have been deducted and deposited. If the requirement is not complied with honorarium paid may be disallowed u/s 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. Articles invited are in a sense offer made and on publication of article, there is a contract.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

Tax Deduction on Honorarium: Avoid Disallowance Under Section 40(a)(ia) by Treating as Professional Fees The discussion addresses the distinction between honorarium and professional fees in the context of income tax. Honorarium is described as a voluntary payment not mutually agreed upon, unlike professional fees, which are for services rendered on request. Despite honorarium being a small fraction of professional fees, tax authorities may dispute its classification, potentially leading to disallowance under Section 40(a)(ia) if tax is not deducted. To avoid disputes, it is suggested to deduct tax from honorarium, especially for regular authors, as a precautionary measure. The reply supports this approach, highlighting that authors can adjust deducted tax against their liability.