TDS Applicable On Advertisement Under Section 194C

What is Section 194C and its Applicability?

As per section 194C of the Income Tax Act, any payment made by an individual to a contractor to carry out a particular work, including labor supply, such individual is required to make a TDS deduction. So, if you pay any amount to an advertising agency to pursue a contract, you have to deduct TDS on advertisements.

The following entities can deduct TDS -

• Any State Government or Central Government.
• Local Authority
• Company
• Co-operative Society
• Corporations established under State, Central, or Provincial Act
• Firm
• Trusts
• University/Deemed University
• A Society covered under the Societies Registration Act, 1980
• Authority under the Indian law that provides housing and accommodation and carries out the development of the town, village, and cities.

What is the Meaning of Work under Section 194C?

Work under Section 194C refers to -

• Broadcasting or telecasting of products
• Catering
• Advertising
• Carriage services for passengers and goods except railways.
• Service related to the manufacture and supply of products from a customer using materials from the customer, as mentioned in section 40A(2).

What is the Meaning of Sub-Contractor Under Section 194C?

As per section 194C of the Income Tax Act, a sub-contractor is a person who -

• Comes under a contract to complete a particular work.
• Provides labor for the partial or complete execution of a particular work as per a contract with an authority.

What is TDS to a Sub-Contractor?

In line with the provisions of the Income Tax Act -

• Any person who pays any sum to any resident.
• Pursuant to a contractual agreement with the subcontractor involving the execution of the entire or partial work initiated by the contractor or the provision of labor for such execution, whether in its entirety or partially, including any labor that the contractor has committed to supply.
• At the time of crediting the amount to the sub-contractor’s account.
• At the time of payment in cash
• By the issuing of a draft, cheque, or by any other mode, whichever is earlier.
• Deduct 1% of the sum as income tax.

When is TDS Under Section 194C Deducted?

Individuals making payment to a contractor or a sub-contractor under section 194C of the Income Tax Act -

• When the payment is being made to a contractor or subcontractor.
• At the time of payment, it is done through cash.
• When the amount paid is transferred to a suspense account of the contractor or sub-contractor.

What is the Rate of TDS?

TDS on advertisements includes the following rates -

• 2% deduction applicable if paying to a resident (not HUF or individual).
• 1% on payment to individual or HUF.
• 20% TDS is applicable in case the taxpayers do not have a PAN card.
• No or Nil TDS is applicable for transporters.

Advertisements that are Eligible for TDS Deduction Under Section 194C?

An advertisement can be in print as well as electronic medium. In such cases, TDS is deducted at 1% of the amount paid for advertisement, including the production of programs for broadcasting or telecasting to be used for these advertisements.

For other telecasting or broadcasting programs, TDS is deducted at 2% of the amount paid.

TDS can be deducted from advertisements in the following situations -

• The client makes payment to the advertising agency, but the advertisement agency does not make payment to the print or electronic media.
• If the advertisement agency provides a bill, including payment for media bills and artwork, a 1% TDS is deducted under section 194C.
• Payment made for the production of programs that are meant for telecasting or broadcasting attracts TDS at 2%.
• Direct payment made to electronic media or print media attracts 1% TDS under 194C.
• Sponsoring debates in the form of banners and seminars includes TDS deduction at applicable TDS rates.

When is TDS Under Section 194C Not Deductible?

There is no need to deduct TDS under the following cases -

• When the contract settlement value does not exceed Rs.30,000.
• The amount paid by an individual or HUF to a contractor or sub-contractor for personal work.
• The total amount already paid or credited to the contractor does not exceed Rs.1,00,000 in a financial year.

Date of Issuance for TDS Certificate

Entities that deduct tax on payments other than salary have to issue TDS certificates on a quarterly basis in Form 16. The table below helps you get an idea of the date of TDS certificate issuance.

What is the Time Limit for Depositing TDS?

• When the payment is made either by the Government or on behalf of the Government on the same day.
• Any other case where the payment is made to people other than the Government
  • If the amount is credited in March, i.e. on or before 30th April.
  • In other months - 7 days from the month end in which the deduction is made.

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