Section 194C | TDS On Advertisement Expenses In India

Overview

What are Advertising agencies for the purpose of section 194C, TDS on advertisement expenses? Advertising agencies refer to the organizations like advertisement companies which are engaged in the procurement and canvassing of advertisements, these advertisements can be for various kinds like Print or Online media. With this regard, if any business is involved in advertising their brand or services, tax is levied on the payment made to the advertising agency u/s 194C. The prime objective of the government introducing this section is to prevent revenue leakage and promote transparency among businesses and accuracy in tax filings. Read all details given in the article about section 194C, TDS on Advertisement expenses.

What is Section 194C- TDS on Advertisement Expenses?

Under Section 194C, TDS on advertisement expenses refers to the tax that is deducted at source (TDS) while making payment to any advertisement agency. These expenses are often made when Individuals/HUF/AOPs/BOIs want or desire to display their brand or services with the help of an advertisement agency on magazines, newspapers, printing presses, etc.

Objectives of Section 194C-TDS On Advertisement Expenses

Here are the objectives of Section 194C-TDS on advertisement expenses:

• To promote transparency and accountability in financial transactions
• To prevent revenue leakage by deducting the correct amount of tax on any advertisement expenditure
• To allow timely collection of taxes for the government, thereby promoting equitable distribution of resources.
• To simplify the procedures for meeting the tax standards and regulations on TDS for advertisement expenses

Eligibility Criteria for TDS on Advertisement Expenses

Here is the eligibility criteria for TDS on advertisement expenses under Section 194C:-

Individuals / HUF / AOP / BOI are required to deduct TDS on advertisement contracts under section 194C, TDS on advertisement expenses; If turnover of the previous financial year exceeds ₹ 1 crore in case of business or gross receipts exceeds ₹ 50 Lakhs in case of profession.

Types of Advertisements Covered

• Advertising: Payments that are made to advertising agencies such as newspapers, magazines, and other print media.
• Broadcasting: Payments that are made to broadcasting agencies, such as religious, educational, international, online, etc.

Threshold Limit u/s 194C | TDS on advertisement Expenses

Limit to deduct TDS on advertisement expense is given below:-

• Single transactions that don’t cross beyond ₹ 30,000 when making the payment to a contractor.
• Aggregate transactions don’t cross beyond ₹ 1,00,000 in a financial year when making the payment to a contractor.

TDS Rates and Calculation under Advertisement Expenses

TDS rates that are applicable under Section 194C, TDS on Advertisement expenses are as follows:-

For example, if a business owner wants to stream their product Ads on media in exchange of consideration for ₹ 80,000 that will get audiences reachable, is required to deduct and deposit TDS @ 2% from the payment made to the advertising agency (other than Individuals & HUF) as per section 194C, TDS on advertisement expenses.

Therefore, TDS u/s 194C = 80,000*2% = ₹ 1,600

Time of TDS Deduction for TDS on Advertisement Expenses

Under Section 194C, TDS on advertisement expenses is required to be deducted:

• At the time of credit of such sum to the account of the contractor; or
• At the time of payment of such sum to the contractor in cash or by issue of a cheque or draft or by any other mode, whichever is earlier

Time to Deposit | TDS on Advertisement Expenses

TDS on advertisement expense which is deducted u/s 194C and is required to be deposited to the central government. Time to deposit of TDS on advertisement expense is given below:

If TDS is deducted on or behalf of the Government, it is deposited on the same day.

For example,Tax on Advertisement expenses is deducted on 15th December and needs to be deposited on or before 7th January. Tax on service contract is deducted on 21st March ; needs to be deposited on or before 30th April.

Steps for Filing the TDS for Advertisement Expenses

Here are the steps for filing the TDS on advertisement expenses, which are as follows:

Step 1: Deduct TDS

The first step towards filing the TDS is to determine the TDS rates accurately. This rate is specifically made under Section 194C. The TDS rates u/s 194C | TDS on advertisement expenses is @ 1%; if payee is individual & HUFs, and @ 2%; if payee is any person other than individual and HUF.

Step 2: Deposit TDS:

After determining the TDS rates accurately, the next step is to ensure that the TDS should be deducted at appropriate rates. Upon deduction of TDS on payment made to the advertising agency, the deductor must pay the deductible tax to the government.

Step 3: File TDS return:

For the advertisement expenses under Section 194C, the deductor has to file the TDS return quarterly using Form 26Q (Return for TDS on all payments except salaries).

Step 4: Issue TDS Certificate

After filing the Form 26Q, the Form 16A would be issued quarterly for payee as a proof of TDS deduction and deposition of TDS with the government on time.

Penalties and Fines under TDS on Advertisement Expense

Here are the penalties and Fines u/s 194C | TDS on Advertisement expenses:-

• TDS is not deducted: If a deductor has not deducted the TDS from the payment of such income, then it charges interest of @1% per month till the date TDS is deducted .
• TDS is deducted but not deposited: If a deductor has deducted the TDS from service contracts, but has not deposited the collected tax to the government, then it charges interest @1.5% from the date when TDS is deducted till the date of deposition
• Section 234E: The late filing will cause you to pay ₹ 200 per day, depending on the maximum tax due.

Exemption under section 194C | TDS on Advertisement Expenses

• Single contract value: When a business pays for not more than ₹ 30,000 in a single transaction in respect of payment for advertisement expenditure, such transaction is not considered for tax deduction.
• Aggregate contract value: When a business pays for not more than ₹ 1,00,000 in a fiscal year in respect of payment for advertisement expenditure, it is not considered for tax deduction.
• Personal purpose: Those payments that are made by the individuals or HUF to a contractor or certain subcontractor, which are exclusively for personal purpose are exempt from TDS deduction u/s 194C | TDS on advertisement expenditure.

Why Choose Bizfoc for TDS?

At Bizfoc, we specialize in providing you the best accounting services in filing your TDS. Here are the reasons why we are known for our services to our clients on filing TDS:

• Assist in suggesting the right documents for TDS filing.
• Providing valuable insights on sections of TDS computations
• Prescribe forms as per the necessity
• Helps in accurate computations for TDS computations and returns
• Tailored advice and guidelines for TDS filing

In general, we assist the client to solve their queries and doubts regarding the documentation, procedures, and fees for filling out the form. Other than making your filing successful, we help you make a better decision by covering every aspect of what you actually need to get your TDS.

Conclusion

The TDS on advertisement expense is tax, which is crucial to deduct upfront the payment for advertising. In conclusion, section 194C of Income Tax Act covers details of TDS on Advertisement expenses, ensuring that tax from such income is appropriately deducted and deposited with the government. Compliance with this section is essential for both payers and recipients to avoid penalties and interest.

Frequently Asked Questions