INDIA BUSINESS WORLD - May 2005
THE MONTH THAT WAS

ROYALTY TO ENTER THE TDS NET

If you are a writer getting a royalty of over Rs 20,000, better watch out. Your publisher will have to deduct tax at source on the royalty paid to you. If he fails to deduct royalty, he cannot claim it as an expense.

The government has sought to cast the TDS net wider in the Taxation Law Amendment Bill tabled in Parliament. Under the existing provisions, tax has to be deducted at source on any payment above Rs 20,000 to a resident by way of fees for professional or technical services at the rate of 5%. Amendments have been proposed in Section 194 J of the Income Tax Act to include "royalty".

The scope of TDS on payment of rent has also been expanded. Earlier, TDS was applicable when a building and say furniture were rented together. Changes have been proposed in the I-T Act (Section 194 I) to make TDS applicable - whether the items are rented separately or together. The TDS rate is 15% if the payee is an individual or a HUF and 20% in other cases.

Rent would mean any payment under a lease, sublease, tenancy or any other agreement or arrangement - either separately or together. The list of items have also been expanded and will include machinery, plant and equipment. The spin-off for the government clearly is more revenues.