TDS 194H OR 194C

[Guest]

A client has a contract with an advertising agency, the agency incurrs the expenditure and the same is reimbursed by the client. however the agency charges the commision which is shown in the invoice separately along with expenses to be reimbursed.

Please suggest that whether the commission amount will be subject to deduction U/S 194H or the whole billamount will be subject to deduction U/S 194C.

[khushbu mevawala]

We have to see first contract between these two parties client and adverising agency.

If their relation exists on principal to principal basis then then whole ant inculing payment for advertisement and commosion is laible to deducted u/s 194C . But if between these parties prncipal and angent i.e one sided relationship exists then commision ant is liable u/s 194H

by : Khushbu V. Mevawala

AI Summary

TDS on commission: characterisation as principal to principal or principal agent determines whether contract payments or commission attract TDS obligations. TDS characterization depends on the parties' relationship: under a principal-to-principal arrangement the whole invoice including reimbursed expenses and separately stated commission is treated as contract payment and subject to TDS under the contract-payment provision; where an agency relationship exists the separately stated commission is income of the agent and is liable to TDS under the commission-tax provision, with reimbursements treated according to their nature.