With the shifting of second season of multi-million dollar Indian Premier League cricket tournament to South Africa, government may lose revenue as the law leaves room for not paying tax deduction on payments to foreign players for an event outside India.
Andrew Flintoff, Paul Collingwood and J P Duminy of England, Kevin Peterson of South Africa and Shaun Taint of Australia have been contracted by different IPL franchisees for a total of $4.7 million.
Bulk of this amount is likely to be paid in the current season even though the agreement between the franchisees and the players is for three years, sources said.
Officials admitted there is a 'grey area' in the income tax law with regard to payments to non-resident sportspersons or sports associations if an event is held outside the country.
Section 194E of the Income Tax Act provides for deduction at source at the rate of 10 per cent before fee is paid to non-resident sportsperson.
While it specifies that 'the income must have been earned by the sportsmen by way of participation in India in any game ...or sports", it does not deal with an eventuality of an event taking place outside the country.
The IT officials are apprehensive that they may lose TDS in the current IPL season beginning April 18 in different South African cities. The exchequer collected Rs 91 crore TDS during the first season of IPL last year.