TDS Applicability on remuneration paid to Directors - U/S 194J(1)(ba)

Section 194J(1)(ba): Any remuneration or fees or commission by whatever name called paid to a director of a company shall be liable for TDS under Section 194J other than those on which tax is deductible under Section 192.

1. This clause will not apply if the tax is deductible under the Section 192 i.e. Income under the head salaries. If there is an employer-employee relationship then such payment is covered under Section 192. Ex. Executive directors are paid salary and they are not entitled to any other fee such as sitting fees etc.

2. If a director is a non-resident director then the TDS is required to be deducted under Section 192 if it is chargeable under the head salaries otherwise under Section 195.

3. This clause will apply only in respect of payment by a company to a director of the company and not in any other cases

4. Following Payments are covered u/s 194J

  • Sitting Fee

  • Fees for attending meetings

  • Remuneration

  • Commission

  • Brokerage

5. Rate of TDS : 10% on the gross amount.

6. Threshold Limit: No threshold limit. Tax is required to be deducted even if the total payment during the year is Rs 500/-.

For Example: Tax Flora paid Rs. 40,000/- p.m to Mr. Swaroop who is an executive director of the company along with Rs. 10,000/- per year for the sitting fees. In this case no TDS is required to be deducted on monthly salary payment as Mr. Swaroop is an executive director of the company. But, TDS of Rs.1,000/- shall be deducted under Section 194J for the sitting fees paid to the director.

Suppose, if he is a non resident, then TDS @ 30% i.e. Rs.3,000/- shall be deducted under Section 195 for the sitting fees paid to the non-resident director.

And suppose if he is a non-executive director, then TDS of Rs. 49,000[(4.8L + 0.1L) *10%] is required to be deducted as both of the receipts shall be considered under section 194J.

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