TDS rates in case of call centre business
It is well-known fact that TDS on services in the nature of professional or technical services is deducted @ 10% on any payment exceeding Rs. 30,000 in aggregate in a financial year. The deduction of tax at the rate of 10% is made as per the provisions of Section 194J of the Income Tax Act, 1961. The call centre activities are covered by the provisions of Section 194J as such TDS in the case of any payment to call centre businesses is liable at the rate of 10% which leads to blocking of a substantial amount of their working capital.
Therefore, in order to promote ease of doing business for call centres, the Government of India brought an amendment in the Income Tax Act, 1961 and thus brought down the rate of TDS from 10 per cent to 2 per cent.
TDS at the rate of 2% on payment to call centres
The amendment as discussed above was brought by the Finance Act, 2017 which took effect from 1st June 2017. The amendment reads as below:
In section 194J of the Income Tax Act, after the third proviso and before the Explanation, the following proviso shall be inserted with effect from the 1st day of June 2017, namely: - “Provided also that the provisions of this section shall have the effect, as if for the words “ten per cent”, the words “two per cent” had been substituted in the case of a payee, engaged only in the business of operation of the call centre.”
Thus, with effect from 1st June 2017, in case of any payments made by a payer to a payee who is engaged in the operation of call centre activities, the payer shall be liable to deduct tax only at the rate of 2 per cent.
Disclaimer: The above article is meant for informative purposes only. Readers are requested to act diligently and under consultation with any professional before applying the information contained in this article.
