The committee, which was set up to study the possibility of expanding the scope of TDS by including more professional services, has said in its report that most of the over 100 services under the service tax net can be brought under the ambit of “professional services”. It has compiled a list of such services which also include professionals such as brand ambassadors, management consultants and financial planners. At present, the income of such professionals attracts only 12.36% service tax.
Professional services are taxed in accordance with Section 194J of the Income Tax Act. This implies if the fee for professional or technical service contract undertaken by any of the listed professionals is more than Rs 20,000, the contract awardee has to deduct tax at the rate of 10%.
But while the department is quite keen to levy TDS on these services immediately, officials said this may not be an appropriate time for such a move. “Given the economic downturn where services such as brokerage and insurance have already taken a hit, this may not be the right time to increase the tax on them,” an official said. Hence, in a partial relief to such professionals, the department plans to bring these services under the TDS net in the Budget next year.
With direct tax receipts slowing down, the CBDT is focusing on strengthening collections through the TDS mechanism. It has already re-structured its TDS administration. Earlier this year as well, the CBDT had classified sportspersons, umpires, referees, coaches, trainers, team physicians and physiotherapists, event managers, commentators, anchors, and sports columnists as “professionals” and brought them under the 10% TDS rate. Earlier they had to deduct tax at source on their earnings at merely 1% to 2%.