8 ad firms found violating TDS norms
The Tax Deducted at Source (TDS) wing of the income tax (I-T) department conducted surveys on eight prominent advertising firms and detected TDS violations to the tune of Rs 200 crore.mumbai Updated: Jul 20, 2011 01:17 IST
The Tax Deducted at Source (TDS) wing of the income tax (I-T) department conducted surveys on eight prominent advertising firms and detected TDS violations to the tune of Rs 200 crore.
The surveys, conducted early last week, went on for two days. Close to 100 I-T officials and staff surveyed the premises belonging to these firms in various parts of the city.
I-T sources said these firms were found to have violated TDS laws in four different ways.
The officials said some of these firms had paid a commission for various services taken, but deducted TDS on the net amount paid and not on the gross. “Because of this up to 15% less TDS was deducted by many firms,” said an I-T official requesting anonymity because he is not authorised to speak to the media.
About the second method, he said a few of these firms had hired spaces for outdoor advertisement.
As per the rule, payments made to those from whom spaces were hired falls in rent category in which the advertising firms should have deducted TDS at the rate of 10%. “However, these firms deducted TDS only at the rate of 2% that is applicable for contracts,” the official said.
In another way, the firms made payments to people on account of professional and technical fees, which attracted TDS of 10%. However, the advertising firms deducted TDS only at the rate of 2%.
In the last method, the I-T authorities found that these firms had kept some professionals who were working only for the respective firms and were not allowed to work for any other company.
They also had fixed hour working. “Here comes the employer-employee relationship where the firms should have deducted TDS at the rate of 30% that is applicable for salaried people,” the official said adding that the firms deducted only 10% TDS showing these people as professionals and not employees.
Calculating all these violations, the total amount came to Rs200 crore for the last two financial years.
The I-T authorities are now in the process of collecting the TDS not deposited by these firms. The authorities would also levy penalty that could go up to 100% of the violated TDS amount. AC Shukla, commissioner of income tax, TDS, refused to comment.