Introduction – TDS on Advertisement Agencies – Section 194C
Section 194C provides for TDS to be deducted on payment made to advertising agencies. TDS on advertisement agencies is required to be deducted under Section 194C of Income Tax Act, 1961 (hereinafter referred to as the “Act”) Below mentioned are a few key points of this concept.
What are ‘advertising agencies’ for the purposes of Section 194C of the Income Tax Act, 1961?
Advertising agencies refer to organisations which are engaged in the procurement and canvassing of advertisements which can be for print or online media.
Applicability of TDS provisions on Advertisement under Section 194C of the Income Tax Act, 1961
When there is a contract between a contractor and ‘specified persons’ and a payment is made to the contractor for undertaking any ‘work’ in the nature of advertisement, a TDS is to be deducted as per the rate specified in Section 194C.
Note: A contract between a sub-contractor and specified persons will also be liable to TDS under Section 194C of the Income Tax Act, 1961.
Who are considered as “specified persons” for the purpose of deduction of TDS on Advertisement under Section 194C of the Income Tax Act, 1961?
A specified person, as per Section 194C includes:
- The Central Government;
- Any of the State Governments;
- Any Local Authority;
- A company;
- A co-operative society;
- A firm;
- A trust;
- Any State authority responsible for providing housing accommodation or planning or development of cities, towns, etc.
- A society registered under the Societies Registration Act, 1860;
- A university established or incorporated under the respective Central, State or Provincial legislation;
- A Government of a foreign country or a non-resident corporate entity or any other association or body of such foreign State;
- An individual, BOI, AOP or HUF has total sales, turnover or gross receipts of more than Rs. 1 crore (in case of business) or Rs. 50 Lakh (in case of profession).
What will be considered as “work” under Section 194C of the Income Tax Act, 1961 for payment for Advertising?
Rate of deduction of TDS on Advertisement under Section 194C of the Income Tax Act, 1961
The rate of TDS to be deducted is as under: –
- TDS shall be deducted at the following rates under Section 194C of Act depending on whether the payment is made to an Individual/ HUF or other than Individual/ HUF:
- Credit is given/ Payment is made to an Individual/ HUF – 1%
- Credit is given/ Payment is made to a person other than an Individual/ HUF – 2%
- No Surcharge and Higher Education Cess (“HEC”) shall be added to the above-mentioned rates.
As per Section 206AB of the Act, TDS at the rate of 20% shall be deducted where the payee does not provide the PAN number to the deductor.
Time of deducting TDS on Advertisement Agencies under Section 194C of the Income Tax Act, 1961
TDS is required to be deducted in case of payment made to the contractor when-
- Such sum is credited of such sum to the account of payee; or
- Payment is made to the payee in cash or by way of issue of cheque/ draft/ any other mode
whichever event takes place earlier.
Deemed application of provisions of TDS on payment made for availing advertising services
Where the amount is credited to the Suspense Account or any other account in the books of the person who is liable to make payment to the deductee, it will be deemed to have been credited to the account of the payee and the provisions for deduction of TDS on payment made on advertising will apply.
Threshold Limit for deduction of TDS on Advertising under Section 194C of the Income Tax Act, 1961
- The threshold limit under TDS on payment made towards Advertising is as follows:
- Payment should not exceed 30,000 in case of a single transaction and;
- Aggregate payments made during the relevant FY should not exceed Rs. 1,00,000
- If it exceeds the threshold limit, then the rate of deduction as provided under Section 194C of the Act will be applicable, i.e., 1% or 2%.
Exemption from deduction of TDS under section 194C of Income Tax Act, 1961
- Sum doesn’t exceed T Rs. 30,000: Where the amount credited/ paid does not exceed Rs. 30,000 in a single transaction, no TDS shall be deducted.
- Sum doesn’t exceed aggregate of Rs. 1,00,000: Further, no TDS shall be deducted, where the amount or aggregate of amounts credited/ paid to the recipient during the FY does not exceed Rs. 1,00,000.
- Personal Purpose: Where consideration paid by an individual or HUF is on account of personal purpose, no TDS is to be deducted on such consideration.
- Non-Resident Contractor: Payment made to a Non-Resident contractor shall not attract TDS under Section 194C of the Income Tax Act, 1961. However, it shall be governed by provisions of Section 195 .
Clarification by CBDT
Circular
- TDS on payments made to advertisement agencies shall be deducted on the entire invoice value, excluding the value of GST (if such value is mentioned separately in the invoice) – Circular No. 23/ 2017.
- However, TDS shall be deducted on the entire invoice value (if value of GST is not mentioned separately in the invoice) – Circular No. 23/ 2017
| Circular | Transaction | Applicability of TDS provisions |
| Circular No.: 715/ 1995. | When advertising agency makes payment to models, artists, etc. | Yes, it is covered u/s 194C |
| Circular No.: 715/ 1995. | If payments are made directly to print or electronic media. | Yes, it is covered u/s 194C |
| Circular No.: 715/ 1995. | When hoardings are put up by the agency. | Yes, it is covered u/s 194C |
| Circular No.: 715/ 1995. | If the space/ premise is rent out or leased and then, hoardings are put up. | No, it is not covered u/s 194C |
| Circular No.: 715/ 1995. | When production of programme is for preparation of advertisement material. | Yes, it is covered u/s 194C |
| Circular No.: 715/ 1995. | When advertising agency gives consolidated bill for art works. | Yes, it is covered u/s 194C |
| Circular No.: 715/ 1995. | Sponsorship agreement of debates, seminars, etc. in colleges through banners, etc. | Yes, it is covered u/s 194C |
| Circular No.: 715/ 1995. | When the client makes a payment to the advertising agent but the advertising agency did not make payment to media | Yes, it is covered u/s 194C |
| Circular No.: 715/ 1995. | Payments to broadcasting and telecasting | Yes, it is covered u/s 194C |
| Circular No.: 714/ 1995. | Payment made for advertising, whether print or media | Yes, TDS will be deducted at 1% |
| Circular No.: 714/ 1995. | Payment made for broadcasting and telecasting where advertising is not involved | Yes, TDS will be deducted at 2% |
Landmark Judgements for Section 194C (TDS on Advertising) of the Income Tax Act, 1961
- In the case of M/s. Perfect Probuild P. Ltd. v. DCIT, [2021], ITAT held that even in a situation where there is no written contract but the payment is made to advertising agency, such payment shall be liable to deduction of TDS under Section 194C.
- In the case of Cowtown Software Design Pvt. Ltd. Vs DCIT [2022], ITAT held that when the payment is made for preparation and execution of advertisement content, it will not be professional service but covered under Section 194C.
Illustrations: –
Mr. X made payments to an advertising agency of Rs. 50,000 for putting up a hoarding on NH 10. At what rate will the TDS be deducted and what will be the amount of such deduction?
Solution: . Since the payment made exceeds the threshold limit, hence the rate and amount of TDS on advertising will be 1% and Rs.500 respectively.
Illustration: XYZ Ltd. made a payment of Rs. 60,00,000 to the artists for their work in a film. At what rate will the TDS be deducted?
Solution: Since the payments are made to the artists, this will not be covered under Section 194C but Section 194J and the rate of TDS will be 5%.
For the Full text of Section 194C of Income Tax Act, please refer this link
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TDS on advertisement agencies is required to be deducted under Section 194C of the Income Tax Act 1961 at the rate of 1% or 2% (as the case may be) for payments made to residents.
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