TDS on Advertisements – Applicability, TDS Rates, Actual implications

Section 194C : TDS on advertisement is deducted U/s 194C and 194J of the Income Tax. This article will explain everything with respect to TDS deduction with respect to advertisements. The issue of the applicability of TDS on payments made by television channels or media houses, publishing newspapers or magazines to advertising agencies for procuring and canvassing for advertisements has been examined by the CBDT in view of representations received in this regard.

TDS on Advertisements

Any person responsible for paying any sum to any resident (contractor) for carrying out any work (includes supply of labour) in pursuance of a CONTRACT between the contractor and the specified person then the specified person has to deduct TDS on the amount paid or payable for the work done.

Here work includes:

  • Advertising
  • Broadcasting, telecasting of products
  • Catering etc.

Applicability

Section 194C is the ruling section for TDS with respect to advertisements.

  • As per Section 194C, the service receiver which is responsible for paying the contractor or sub-contractor, with respect to the contract to carry out any work or work-related activities, is also responsible for deducting TDS from such payment.
  • Such TDS is required to be deducted earlier of
    • Payment or
    • Credit
  • Work which is carried out under any contract also includes advertising. Hence, section 194C is also applicable for advertisements.
  • However, such TDS deduction is warranted by the person who receives the service from an advertising agency and hence, an advertising agency is not under the onus for deducting TDS.
  • Payments made to advertising agencies are subject to TDS deduction under 194 However, payments made by an advertising agency to its artists, photographers, etc. is covered under 194J and not 194C. Hence, these payments by advertising agency are subject to TDS deduction @ 5%.

For e.g.- if any advertising agencies present a single bill for artwork and for payments made to the artists etc. with respect to any advertisement, then TDS must be deducted under 194C, whereas advertising agency must deduct TDS @ 5% under section 194J.

Threshold for deducting TDS

The service receiver must deduct TDS under 194C on advertisements where

  • Either total sum paid or credited during any financial year is more than Rs.100000(applicable from June 2016) or
  • Single payment to any service provider which is more than Rs.30000

TDS rates

  • Where the payment is made to any individual or HUF – 1%
  • Where the payment is made to any other entities – 2%

Exclusions

  • Section 194C is not applicable where the payer is individual or HUF or AOP or BOI, who have gross receipts, sales, or turnover not more than
  • 1 crore for any business
  • 25 lakhs for any profession
  • Section 194C is also not applicable where such payment is for the personal use of the payer (who may be either individual or HUF).

Actual implications

  • Payment made to Doordarshan – Not covered under the purview of 194C. Hence payments are not eligible for TDS deduction under 194C.
  • Direct payments to print or electronic media – Covered under 194C and hence payments eligible for TDS deduction under 194C.

Where the advertisement is put up by installing hoardings

  • If space is taken on rent and then further sublet for putting advertisement hoardings, the eligible for TDS under section 194I (rent).
  • For any other cases, 194C is applicable.

Situation where a person receives commission for arranging release of advertisement

TDS deduction should be on total bill amount and not only for the portion of the commission.

Sponsorship of debates, seminars, to earn publicity by way of banners by the organizers – 

Section 194C is applicable hence TDS must be deducted at the prescribed rates.

Examples

Question – Our company has published an advertisement regarding the job opportunity, in a news paper. At what rate i have to deduct TDS , is there any minimum limit for non deduction of TDS on advertisement.

Solution – The Advertisement expenses comes under u/s 194C – Contract.

The limit is if you are paying more than 30,000 per person during the financial year the tds to be deducted would be as follows;

  • 2% if the deductee is company
  • 1% if the deductee is non company

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