Section 194C: TDS On Advertisement

Income Tax

Any payment made to an advertising agency (contractor) is liable for a TDS under section 194C. Here we have discussed the TDS on advertisement covered under section 194C. It includes deductions on payments made to advertising agencies for publishing newspapers, magazines, canvassing advertisements and others. Learn more. 

What Is Section 194C and Its Applicability?

Section 194C of the Income Tax Act states that if any person makes a payment to a contractor to carry out a particular work, inclusive of labour supply, then he/she has to make a TDS deduction. So, if you pay an amount to an advertising agency in pursuance of a contract, they must deduct a TDS on advertisements. 

The following individuals are eligible to make TDS deductions as per Section 194:

• Local authority
• Central Government or State Government 
• Company
• Co-operative society
• Corporations established under any Provincial, Central or State Act 
• Trusts
• Firm
• University / Deemed university
• An authority under the Indian law that is involved with providing housing accommodation needs and carrying out development of town, cities and village 
• A society that is covered under Society Registration Act, 1980 or any other corresponding law applicable in India

What does Work Mean under Section 194C?

The meaning of work under Section 194C is as follows:

• Telecasting or broadcasting of products 
• Advertising
• Catering
• Carriage service for passengers and goods except for railways
• Service-related to manufacture and supply of products for a customer by using materials from the customer as mentioned in section 40A(2). 

Also Read: New Tax Regime Under Section 115BAC

What Is the Meaning of Sub-Contractor under Section 194C?

As per Section 194C of the IT Act, a sub-contractor is someone who:

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

When Can One Deduct TDS under Section 194C of the Income Tax Act?

Those making a payment to a contractor or sub-contractor as per Section 194C of the IT Act has to deduct TDS:

• When payment is being credited to the account of the contractor or subcontractor 
• During the time of payment through cash
• When the amount to be paid is transferred to a suspense account of the contractor or sub-contractor

What Is the Rate at Which Deduction Is Allowed Under Section 194C?

While applying TDS on advertisements, keep the following rates in mind for correct calculation:

• 2% deduction applicable when paying to a resident (not HUF or individual)
• 1% on individual or HUF payment
• 20% TDS if taxpayers do not have a PAN card
• Nil for transporters  

What Are the Cases under Which TDS under Section 194C is Not Deductible?

You don’t need to deduct a TDS under Section 194C under these cases:

• When the contract settlement value is not more than Rs. 30,000.
• The amount that an individual or HUF pays to a contractor or sub-contractor for works related to personal purposes
• The total amount that is already paid or credited to the contractor does not exceed Rs. 1,00,000 in one financial year

Advertisement that Qualify for TDS Deduction under Section 194C

Advertisement can be in both electronic and print medium. In such cases, TDS deduction will take place at 1% of the amount paid for advertisement, including the production of programmes for broadcasting or telecasting that are to be used for such advertisements.

For all other telecasting or broadcasting, including the production of programmes used for such broadcasting or telecasting the TDS deduction will take place at 2% of the payment amount.

Although ‘advertising’ is not clearly defined in the IT Act provisions, TDS deduction on advertisement will take place for the following situations: 

• The client pays to an advertisement agency but the advertising agency does not make any payment to the electronic or print media
• If an advertisement agency provides a bill that includes payment for art work, media bills, then 1% TDS deduction is applicable under Section 194C
• Payments made for the production of programmes meant for broadcasting or telecasting will attract TDS at 2%
• Direct payments to electronic or print media will attract 1% TDS under Section 194C
• Sponsoring seminars, debates in the form of banners will include TDS deduction at applicable rate under Section 194C.

Also Read: A Step By Step Guide To make TDS Payment Online

Final Word

The above is an in-depth guide on Section 194C covering TDS on advertisements. So if you are paying a contract amount of more than Rs. 30,000 to an advertising agency follow the instructions mentioned above. In addition, you can find details like applicable tax rate, exceptions, calculation process, etc. 

Frequently Asked Questions

1. What is the due date of depositing tax deducted at source under Section 194C?

Follow the below structure to deposit TDS on time:

• One must pay TDS for months ranging from April to February on or before the 7th of the following month.
• One must pay TDS for March month on or before 30th April. 
• Deposit it on the same day if TDS is for any other month or is paid by the Government. 

2. What conditions must one meet to apply Section 194C?

The following are conditions that ensure whether the Section of the Income-tax is applicable or not:

• The contractor or sub-contractor to whom ‘specified person’ makes payment is a resident of India.
• One must complete their work against which they receive payments
• The amount mentioned in the invoice should exceed Rs. 30,000 covering the contract. 

3. Is having a contract a requirement for applying TDS on advertisement?

Yes, having a legitimate contract binding by law is one of the requirements for applying TDS on advertisements. So, if there is no contract between two parties (person and contractor/sub-contractor), TDS is not applicable. 

4. What is the due date for issuing the TDS certificate?

According to provisions of Income Tax Act, if you deduct TDS under Section 194C, then you need to issue the TDS certificate within 15 days of filing of fourth quarter TDS return.

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