SECTION 194(1)(BA)-TDS ON DIRECTOR REMUNERATION

Section 194(1)(ba)-TDS On Director Remuneration

Section 194(1)(ba)-TDS On Director Remuneration

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Section 194J(1)(ba) | TDS on Director Remuneration


Overview of Section 194J(1)(ba)


Section 194J(1)(ba) of the Income Tax Act, 1961, mandates the deduction of Tax Deducted at Source (TDS) on any remuneration, fees, or commission paid to a company's director, excluding those payments considered as salary under Section 192. This provision, introduced in the Finance Act of 2012, aims to enhance tax compliance and ensure transparency in the taxation of directors' earnings.



Types of Directors' Remuneration Other Than Salary


Directors may receive various forms of remuneration beyond their regular salaries, including:

✔ Sitting Fees – Payments for attending board or committee meetings.
✔ Commission – A percentage of profits or specific financial metrics.
✔ Professional Fees – Compensation for services rendered in a professional capacity.
✔ Consultancy Fees – Payments for advisory roles or consultancy services.
✔ Other Monetary Benefits – Any additional financial incentives not classified as salary.



TDS Applicability on Directors' Remuneration


Under Section 194J(1)(ba), any payment made to a director in the form of fees, commission, or remuneration—excluding those categorized as salary—is subject to TDS.

✔ No Minimum Threshold – TDS must be deducted irrespective of the amount paid.
✔ TDS Rate – The applicable TDS rate for such payments is 10%.



When to Deduct and Deposit TDS on Directors' Remuneration?


TDS on directors' remuneration should be deducted at the earlier of the following events:

✔ Credit of Payment – When the amount is credited to the director’s account.
✔ Actual Payment – When the payment is actually made to the director.

Once deducted, the TDS must be deposited with the central government within the specified timelines:

✔ For Non-Government Deductors:

  • Payments from April to February → On or before the 7th of the subsequent month.

  • Payments in March → On or before the 30th of April.


✔ For Government Deductors:

  • Payments from April to February → On or before the 7th of the subsequent month.

  • Payments in March → On or before the 30th of April (with the challan deposited within 7 days after the end of March).





Important Considerations


✔ No Threshold Limit – Unlike other payments under Section 194J, there is no threshold limit for TDS deduction on directors' remuneration.
✔ Non-Salary Payments – Only payments not classified as salary are covered under Section 194J(1)(ba). Salary payments to directors are subject to TDS under Section 192.
✔ Applicability to All Companies – Both private and public companies are required to deduct TDS on such payments to directors.



Conclusion


Section 194J(1)(ba) plays a crucial role in ensuring that all non-salary payments made to company directors are subjected to TDS, thereby promoting transparency and compliance within corporate taxation. Companies must diligently adhere to these provisions to avoid penalties and ensure smooth financial operations.



FAQs


Is TDS applicable on directors' sitting fees?


✔ Yes, TDS is applicable on sitting fees paid to directors under Section 194J(1)(ba).

What is the TDS rate for payments made to directors under Section 194J(1)(ba)?


✔ The TDS rate is 10% for such payments.

Is there any threshold limit for TDS deduction on directors' remuneration?


✔ No, there is no threshold limit; TDS must be deducted irrespective of the payment amount.

Are salary payments to directors covered under Section 194J(1)(ba)?


✔ No, salary payments to directors are covered under Section 192.

What are the due dates for depositing TDS deducted on directors' remuneration?


✔ For non-government deductors:

  • Payments from April to February → 7th of the subsequent month.

  • Payments in March → 30th of April.


By understanding and implementing the provisions of Section 194J(1)(ba), companies can ensure compliance with tax laws and contribute to a transparent financial ecosystem.

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