We are paying web hosting charges to a person resident in India. Is the same liable to TDS? If yes under which section? Amit, New Delhi.
Section 194I covers provisions for tax at source on rent payments exceeding Rs 1,20,000 in a year. Explanation below this section defines rent as under (mark the word in red )
“For the purpose of this section,-
(i) Rent means any payment ,by whatever name called ,under any lease,sub-lease,tenancy, or any other agreement or arrangements for the use of (either separately or together ) any –
a) ……..
b) …….
c) …….
d) Machinery; or
e) Plant; or
f) Equipment; or
g) …….
h) …..
Whether or not any or all of the above are owned by the payee;
In case of webhosting, the space and bandwidth is taken on rent and which has direct nexus with the capacity and type of computer server and other plant and machineries installed by the hosting company. Therefore, the rent to such company should be covered u/s 194 I if the payments exceeding Rs 1,20,000 in a year is to be made a resident hosting company or person. Also note that even if the company ,which is providing you service , has no plan and machinery of its own , the payment to him/her it shall be covered because of the clear cut explanation in last line”Whether or not any or all of the above are owned by the payee;”
However , remember for individual and HUF is liable to deduct tax only if the turnover is exceeding Rs 40 lakhs or professional income exceeds Rs 10 lakhs. In financial year immediately preceding the year in which payments are made.
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