Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether TDS Is Required For Commission To Franchisees?

QUERY: A Ltd. is engaged in the business of running a call centre. The company also runs a training centre for people wanting to join call centre. The company has appointed through written contracts various franchisees to run training centres in various parts of the city. As per the terms of the contract, the franchisees collect training fees and after retaining certain amount towards recoupment of their cost and commission, remit balance amount to A Ltd. Is TDS applicable in such case? If so, on what amount and at what rate? How will this be practical since A Ltd. is not directly making any payment to the franchisees?
ANSWER: – Theory of Principal and Agent would apply.

– A Ltd. – Principal in agreement with Franchisees to run the training centres for people wanting to join call centres.

– The franchisees’ would be entitled for commission, hence, S. 194H would be applicable and TDS @ 10% on commission over Rs. 5,000/-

– A Ltd. could ask franchisee to pay on its behalf TDS under its PAN/TAN Nos. or raise the debit note on franchisee for TDS and pay the same.

Posted in Income-tax

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Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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