Tax at Deducted source issue

[vishveshwar rao]

Hi I am working as a independant business consultant for a company on a contract basis for their clients. While making the payment to me, they are dedcuting TDS at 10% and paying the amount. As per section 194C, TDS should be 1%. Kindly clarify and give your suggestions to avoid the TDS deduction at 10%. Regards Vishveshwar Rao

[rishi mohan]

Please refer Sec. 194J of the Income Tax Act, 1961.i.e Tds on Fees for Professional/Technical services.

[Guest]

Since you are providing services as a business consultant Sec 194J will be attracted and hence the applicable TDS rate is 10%.

AI Summary

TDS on Fees for Professional/Technical Services requires deduction at the professional services rate, not the contractor rate. Payments to an independent business consultant are characterised as fees for professional/technical services and should be treated under Section 194J principles; therefore the withholding/tax deduction treatment applicable to professional/technical fees, not the contractor/works category, applies when the payer deducts tax at source.