As per Section 194J(1)(ba), any remuneration or fees or commission by whatever name called other than those on which tax is deductible under Section 192, to a director of a company shall be liable for TDS under Section 194J.
Analysis of Section 194J(1)(ba)
- This clause will apply only in respect of payment by a company to a director of the company and not in any other cases.
- This clause will not apply if the tax is deductible under the Section 192 i.e. Income taxable under the head salaries. If there is an employer-employee relationship then such payment is covered under Section 192. Generally, executive directors are paid salary and they are not entitled to any other fee such as sitting fees etc.
- 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 or under Section 195.
Nature of Payments covered u/s 194J
- Sitting Fee
- Fees for attending meetings
- Remuneration
- Commission
- Brokerage
Rate of TDS
TDS is required to be deducted @ 10% on the gross amount.
Threshold Limit
There is no threshold limit so tax is required to be deducted even if the total payment during the year is Rs 10.
Examples
- ABC Ltd paid Rs. 20,000 per month to Mr. B who is an executive director of the company along with Rs. 8,000 per year for the sitting fees
No TDS is required to be deducted on monthly salary payment as Mr. B is an executive director of the company. However, TDS of Rs 800 shall be deducted under Section 194J for the sitting fees paid to the director.
- ABC Ltd paid Rs. 20,000 per month to Mr. B who is a non-resident executive director of the company along with Rs. 8,000 per year for the sitting fees
No TDS is required to be deducted on monthly salary payment as Mr. B is an executive director of the company. However, TDS @ 30% i.e. Rs 2400 shall be deducted under Section 195 for the sitting fees paid to the non-resident director.
- ABC Ltd paid Rs. 20,000 per month to Mr. B who is a non-executive director of the company along with Rs. 8,000 per year for the sitting fees
TDS of Rs. 24,800 (Rs 2,48,000 *10%) is required to be deducted as both of the receipts shall be considered under section 194J.
