TDS on Advertisement: Understanding Section 194C
Payments made to advertising agencies are subject to a TDS deduction under Section 194C. Payments made to advertising agencies for the publication of magazines, newspapers, ads, etc., may also fall under this category. Organisations that deal with advertising campaigns and procurement (for online or print media) are called advertising agencies. Let's examine TDS's relevance, spending cap, and other essential facets of the commercial advertisements.
Table of Contents
What is Section 194C and its Applicability?
Section 194C of the Income Tax Act states that people must deduct TDS if they pay a contractor to perform a specific task. For instance, you must deduct TDS from advertising expenses if you pay an advertising agency a certain amount to bid on a contract. The following organisations will deduct TDS in this case:
A State or Federal Government Organization
Cooperative society
Corporations formed under federal, state, or provincial Act
Trust
Government municipalities.
Firm
A university established or incorporated by the applicable State, Federal, or local laws.
A society established by the 1980 Societies Registration Act
An organization authorised by Indian law that oversees the growth of towns, cities, and villages and offers housing and lodging.
An individual, AOP, BOI, or HUF has gross receipts, total sales, or turnover that exceeds Rs 50 Lakh (if it's a profession) or Rs 1 crore (if it's a business).
A foreign government, a corporation based outside of the country, or another organization affiliated with that foreign state
A company that is registered under the 1860 Societies Registration Act.
Meaning of Work Under Section 194C
The work covered under section 194C is listed below:
Marketing
Transmitting
Catering
Services about the production and delivery of goods using materials from the customer, as defined by section 40A(2), including passenger and freight carriage services, except railroads.
Sub-Contractor Under Section 194C
"Sub-contractor" could refer to any individual:
Who contracts with the contractor to accomplish, or
To provide labour for, the completion of all or a portion of the work that the contractor undertakes under a contract with any of the authorities or
For the provision of any labour, whether entirely or in part, that the contractor has agreed to provide under the terms of his agreement with any of the authorities listed in this section.
TDS to a Sub-Contractor
The Income Tax Act stipulates that TDS to a subcontractor entails:
Anyone who makes a payment to a resident subcontractor
Adhering to a contract with the subcontractor provides for the full or partial completion of work started by the contractor or the provision of labour, including any labour the contractor has committed to supply.
TDS upon payment or TDS upon crediting the money to the subcontractor account, whichever comes first.
For individuals or HUFs, deduct TDS at 1%, and for any other entity, deduct TDS at 2%.
TDS Rates on Advertisements
TDS on ads includes the following rates:
The tax must be paid to a resident (not an individual or HUF) to qualify for a 2% deduction.
Payments released to an individual or HUF are subject to a 1% deduction. Taxpayers without a PAN card are subject to 20% TDS.
Advertisements Eligible for TDS Deduction
An ad may appear in print or on an electronic medium. In these situations, TDS is subtracted at a rate of 1% of the total amount spent on advertising, which includes the creation of broadcast or telecast programs for these commercials. TDS is deducted from other broadcasting or telecasting programs at a rate of 2% of the total amount paid. The following circumstances allow for the deduction of TDS from advertisements:
The advertising agency receives payment from the client, but neither the print nor electronic media receive payment from the advertising agency.
Section 194C deducts 1% TDS if the advertising agency provides a bill that includes payment for media bills and artwork.
TDS is applied at the rate of 2% to payments made for the creation of programs intended for broadcasting or telecasting.
Under 194C, 1% TDS is applied to direct payments made to print or electronic media.
Debate sponsorship includes TDS deduction at the applicable TDS rates and can take the form of banners and seminars.
When is TDS Deducted Under Section 194C
Any of the following must be deducted before TDS is paid to a contractor or subcontractor:
Upon transferring funds to a subcontractor or contractor
When money is received
Upon crediting the contractor's or subcontractor's suspense account with the paid amount
When is TDS Under Section 194C is Not Applicable
According to Section 194C, the following situations exempt advertising services from TDS:
The sum that an individual or HUF pays a contractor or subcontractor
For personal use when the contract value is less than Rs. 30,000 per contract
In a fiscal year, the total amount paid to the contractor does not surpass Rs. 1,00,000.
Date of Issuance for TDS Certificate
TDS certificates (in Form 16A) must be issued quarterly by those organisations that deduct taxes from payments other than salaries. The TDS certificate's issuance date is displayed in the table below:
Quarter | Date of Issuance (if it’s Government deductor) |
April - June | 15th August |
July - September | 15th November |
October - December | 15th February |
January - March | 15th June |
Time Limit for Depositing TDS
The deadline for depositing TDS is the same day the government or someone acting on its behalf releases the payment.
The following deadline applies if the payment is to anyone other than the government:
The deadline is April 30th if the payment is in March.
The deadline for all other months apart from March is seven days from the end of the month (the seventh day of the following month) in which the amount was debited.
Conclusion
It can be difficult to understand tax laws, particularly relating to advertising. Consider seeking assistance from professionals such as chartered accountants (CAs) if you're experiencing difficulties with payments and taxes. They simplify the tax filing process and can help you with any inquiries regarding advertising-related taxes. For a more seamless tax experience, rely on the knowledge of certified public accountants (CAs) who are familiar with tax regulations.
FAQ
Q1. Is TDS applicable on advertisement charges?
Section 194C of the Income Tax Act states that a person must deduct TDS if they pay a contractor for any specific work. Therefore, if you are paying an advertising agency, TDS on advertisement charges is applicable.
Q2. Is TDS applicable to online advertisement?
Yes, payments for internet ads are subject to TDS. TDS on digital advertising is applicable if the payment is to an advertising agency, per Section 194C of the Income Tax Act. It covers the cost of publishing magazines, newspapers, campaign ads, and other materials. Online ads are subject to the same TDS as social media ads.
Q3. How to calculate TDS on advertisement?
An advertisement may appear in print or on electronic media. TDS on ad campaigns can computed by multiplying the applicable TDS rate by the payment amount. Let's say, for example, that you pay Rs. 50,000 to an advertising agency (apart from Individual or HUF) as the sole payment for that fiscal year. The TDS deduction is Rs. 50,000 × 2% = Rs. 1,000.
Q4. What is the TDS rate on advertisement?
When making a payment to an individual or HUF, the payer must deduct TDS at a rate of 1%; if making a payment to anyone else, the deduction must be 2%.
Q5. What is the TDS rate for Google advertising?
If the transaction is with a Google entity registered in India, the TDS rate for Google advertising is 2% by Section 194C of the Income Tax Act. Transactions made with a Google entity not registered in India are exempt from TDS. If the consideration exceeds ₹1,00,000 for the fiscal year, an equalization levy of 6% is implemented for those abroad.
Q6. Is it mandatory to have a written contract to attract TDS under Section 194C?
No, a written contract is not needed to enforce TDS under Section 194C. Even if the agreement is only verbal, TDS must be deducted at source.
Q7. What is the TDS limit for section 194C?
The TDS threshold limit for advertising-related payments is as follows:
• A single transaction cannot exceed Rs. 30,000
• The total amount paid during the fiscal year shouldn't be more than Rs. 1,000,000.00.
Q8. What conditions should be met to apply Section 194C?
The following criteria determine whether or not the income tax section is applicable:
• The "specified person" who receives payment from the contractor or subcontractor is an Indian citizen.
• To be compensated, one must finish their work.
• The invoice amount should be more than Rs. 30,000 to cover the contract.
Q9. Is having a contract an essential requirement for applying TDS on advertisement?
One of the prerequisites for using TDS on advertisements is having a legally binding and valid contract. Therefore, TDS is not applicable if there is no contract between the individual and the contractor or subcontractor.
Q10. What is the due date for issuing the TDS certificate under Section 194C?
If you deduct TDS under Section 194C, you must issue the TDS certificate within 15 days of filing your fourth-quarter TDS return, per the Income Tax Act's provisions.
Q11. What is the difference between 194C and 194J?
The Income Tax Act of India's Sections 194C and 194J deal with TDS on payments made for particular services. Section 194C covers any payment made by an individual to an advertising agency. However, Section 194J is applicable if the advertising agency pays a professional in any way. Costs to contractors, including advertising costs, are covered under Section 194C. For individuals or HUFs, the TDS rate is 1%; for other bodies, it is 2%. Fees for technical or professional services covered by Section 194J; 10% TDS is applicable.
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