SECTION 194E: TDS ON NON-RESIDENT SPORTSMEN & ASSOCIATIONS

TDS U/S 194E: TDS ON PAYMENT TO NON-RESIDENT SPORTS PERSON/ SPORTS ASSOCIATON/ ENTERTAINER

1. What do you mean by TDS?

TDS stands for Tax Deducted at Source. TDS is a kind of tax that is deducted by the payer before making certain payments like Salary, Rent, Commission, Interest, Royalty, Professional Fees etc. to the payee.

TDS is required to be deducted at the source if the money to be paid and the money already paid exceeds a specified amount.

The Payee can claim this tax deducted by the payer while paying his income tax liability for the year, and if the TDS deducted is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TDS was to reduce the Tax evasion by the person receiving the income.

Note: -

Payer- A payer is a person or organization who is responsible for deducting TDS before paying the amount to Payee.

Payee- A Payee is a person or organization who receives the payment from the payee after the TDS deduction.

2.  What is TDS under Section 194E of Income Tax Act?

Section 194E of Income Tax Act, 1961 mandates that TDS to be deducted by the payer while making mentioned payment to a person who is Non-resident sportsperson or Non-resident entertainer or Non-resident sports association.

3. Incomes covered under Section 194E?

1. Income received by a Non-resident sports person (who is not a citizen of India) by way of: -

• Participation in any game or sport in India.
• Advertisement.
• Contribution of article in newspapers, magazines, journals relating to games or sports in India.

2. Guarantee income received by Non-resident sports association or institution in relation to any game or sports played in India.
3. Income received for performing in India by Non- resident entertainer(who is not a citizen of India)

4. When is TDS to be deducted under Section 194E?

TDS is required to be deducted: -

• At the time of payment.

            Or

• At the time of crediting the account of payee, whichever is earlier.

Few examples of date of deduction are: -

5. Who is required to deducts TDS under Section 194E?

Any person while making payments to Non-resident sports person or Non-resident entertainer or Non-resident sports association is liable to deduct TDS.

NOTE: -

This section i.e. TDS on payment to Non-resident sports person or Non-resident entertainer or Non-resident sports association is not applicable while making such payments to resident persons.

Example: -

Q. Payment of Rs. 5 lakhs were received by Mr. Phelps who is an athlete by a manufacturer of a swim wear for brand ambassador. What is rate of TDS if

a. he is a resident b. he is non-resident?

A. Payment to a resident sports person is deductible under Section 194J @ 10% if the sports person is a non-resident (who is not a citizen of India) then TDS is deductible @ 20.8% (20%+4%) under Section 194E.

6. Rate of TDS under Section 194E?

The TDS rate under this Section 194E is 20% plus 4% cess i.e 20.8%.

7. Exemption under Section 194E?

No exemption under this section every payment made to person specified above shall be liable for TDS deduction.

8. Time limit for deposit of TDS under Section 194E?

The due date for deposit of TDS is as below: -

9. What is the due date for filing of TDS return under Section 194E?

TDS is to be deposited monthly on the dates mentioned above but the return is to be filed quarterly on or before the below mentioned dates: -

10. Type of TDS return & form to be issued?

TDS under this section has to filed quarterly through FORM 26Q and the deductor has to issue FORM 16A to the employee after filing of return.

11. Fees/ Penalties for Late/ Non- Filing of TDS u/s 194E?

Following penalties/fees will be levied if there is delay in TDS deduction or delay in deposit of TDS or non-filing of quarterly return.

FREQUENTLY ASKED QUESTIONS?

Q. Is this section also applicable to payment to Resident sports person?

A. NO, this section is applicable to payments made to Non-resident sports person or Non-resident entertainer or Non-resident sports association.

Q. TDS under Section 194E is flat rate or it includes cess also?

A. TDS under Section 194E is not deductible at flat rate it includes cess also i.e. 20% + 4% cess.

Q. Is there any exemption under Section 194E?

A. NO, there is no exemption under Section 194E of the income tax act.

Q. What all income earned by non-residents are liable for TDS deduction under Section 194E?

A. Income received by a Non-resident sports person (who is not a citizen of India) by way of: -

                   Participation in any game or sport in India.

                   Advertisement.

                  Contribution of article in newspapers, magazines, journals relating to games or sports in India.

             Guarantee income received by Non-resident sports association or institution in relation to any game or sports played in India.

             Income received for performing in India by Non- resident entertainer (who is not a citizen of India).