TDS section

[Asked by Guest]

Please let us know why and under which sectionof the income tax act,  the tds need to be deducted for the call centre services rendered to clients.  The profit percentage of  any  domestic call centre   service, in the BPO industry   is not more than  5-6%.  Since the BPO business model is based on, high turnover , capital intensive , with a thin profit margin, it is in approprite for the clietns to deduct 10% TDS on every bill treating this service is equating it to " Professional services or Technical services" bringing TDS attraction  u/s 194J of the  Income Tax Act.   Personally feels that, for all the domestic  call center services should be brought u/s 194 C.

Pleaes help me understand better. 

[DEV KUMAR KOTHARI]

In a call centre  services rendered are with help of man,  machines and  technology. the services rendered are not in nature of professional services or technical services. The call centere agents/ executive ( who  makes calls)  generally can be a candidate with a first class HS pass and fleuent in speaking- any professional qualification is not required. The contents of calls and other conversation is as per records and guidance of client on whose behalf call is made. Therefore, when call center work on behalf of a client and makes call it can be said that it is a 'works contract'. Therefore, TDS u/s 194C is proper.

When an engineer carry engineering activity with help of machines, tools  and other manpower, e.g for repair of machines, dismentalling or assembling and installatin etc.  we find element of capital and labor is significant , in that situtation the charges payable even to engineer falls under catagory of 'works contract' and not professional fees.

Looking from another angel, as rightly stated by the querist, call centre activity is also a capital and labour intensive activity. It is basically labor activity and not a professional or technical education based activity. Therefore, in my view TDS u/s 194J is not proper.

Thanks for your response.  Very  valid comments have been made by you on the deduction of appropriate section for tds

AI Summary

Works contract classification for call centre TDS: treat the services under 194C rather than as professional fees under 194J.
Call centre services are performed by non professional agents under client direction using labour supported by machines and technology; these characteristics align such services with a labour and capital works contract rather than professional or technical services, making TDS deduction under 194C appropriate and deduction under 194J inappropriate.