TDS ON REMUNERATION PAID TO DIRECTORS u/s 194J(1)(ba) of INCOME TAX ACT,1961

TDS on Remuneration paid to Directors u/s 194J(1)(ba) of Income Tax Act,1961, Remuneration paid to Directors  u/s 194J(1)(ba), tds us 194J(1)(ba), Remuneration paid to Directors as per income tax act

The newly inserted clause (1)(ba) of 194J inserted on 1st July 2012 reads as under:

Any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company shall liable to be deducted @10%.

Till the introduction of the above new clause, there is an ambiguity whether the tax is to be deducted at source on sitting fees and commission paid to directors or not. Now with the insertion of new clause (1)(ba) in Section 194 J, it clear that TDS has to be made from any remuneration or fees or commission paid to directors.

Readers may note that the newly inserted clause covers any remuneration paid whether by way of fees or commission or by any other name and such payments shall be subjected to TDS @10%.

Readers may also note that prior to the insertion of proposed amendment, Section 194(J) refers to TDS on amounts paid for professional and technical services. By amendment TDS even sitting fees and commission paid have to be covered. By implication sitting fess and commission are bracketed under professional and technical Services.

Some companies have been following the practice of deducting TDS. But with the introduction of clause 1(ba) in Section 194J, it becomes mandatory for all companies to deduct TDS @10% on sitting fees, commission paid to directors other than whole time directors and Managing directors. This amendment is welcome as TDS can now be effected on sitting fees, commission and any other payments made to Directors.

This Section 194J (1) (ba) indicates that if remuneration paid is covered under section 192, this clause is not applicable. If TDS is not made U/S 192, it has to be invariably covered under 194J.

This article has been written by CA Prashant Doshi. He can be reached at [email protected]

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