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TDS ON G-SUITE
G Suite (formerly Google Apps for Work and Google Apps for Your Domain) is a brand of cloud computing, productivity and collaboration tools, software and products developed by Google. G Suite comprises Gmail, Hangouts, Calendar, and Google+ for communication; Drive for storage; Docs, Sheets, Slides, Forms, and Sites for collaboration; and, depending on the plan, an Admin panel and Vault for managing users and the services.
Under the Income Tax Act, 1961, the concept of Tax Deduction at Source (TDS) was introduced with an aim to collect the tax from the very source of income. Under TDS, the deductor who is liable to make payment of the specified nature to the deductee is liable to the deduct tax at source and remit the collected tax into the account of the Central Government.
There are various issues with regard to the applicability of Tax Deduction at Source (TDS) on G suite transaction and the same is taken up in the current article.
Applicability of TDS on G-Suite
The person availing the services of G-suite is liable to deduct TDS @ 10% u/s 194J of Income Tax Act, 1961.
The services provided by the Google are classified under ‘Other information Technology Service’.
Section 194J of Income Tax Act, 1961
- One of the most important and common type of payments that a business entity makes is towards professional fees or fees for technical services.
- The type of payments covered under this section is as follows:
- Professional fees.
- Fees for technical services
- Remuneration paid to directors excluding salary (For e.g., sitting fees to attend board meetings)
- Payments in the nature of non-compete fees (i.e., fees paid to not carry on any business or profession for a specified time and within certain geographical boundaries) or fees paid to not share any technical knowledge or know-how.
- Any payment covered under this section shall be subject to TDS at the rate of 10%.
Procedure for deduction of TDS under the GOOGLE billing system
However, the Google billing and payment procedure is that the bill raised needs to be paid up fully i.e. there is no provision to deduct TDS from the payment.
Consequences of non deduction of TDS-
- DISALLOWANCE OF EXPENDITURE UNDER SECTION 40(a)(i) OF THE INCOME TAX ACT –
Provisions of section 40(a)(i) of Income Tax Act, 1961 provides that in case any sum is payable outside India or to a non-resident person, is chargeable to tax in India in the hands of the recipient and subjected to TDS. If TDS on such sum is not deducted, such sum shall not be allowed to be deducted.
- INTEREST IS PAYABLE IN CASE OF NON-DEDUCTION OF TDS –
In case of non-deduction of TDS, the person is liable to pay interest @1% for every month or part of the month on the amount of such tax. Interest would be payable for the period from the date on which such tax was deductible to the date on which such tax is deducted.
- PENALTY IS LEVIABLE FOR NON-DEDUCTION OF TDS –
In case of non-deduction of TDS, the same is liable to penalty of an amount equal to TDS not deducted.
If one finds difficult in deducting TDS when one purchases G suite directly, in that case, the buyer has an option to better purchase from reseller / G Suite Partner since deducting TDS in that transaction would be easy with a Local G Suite partner. You can directly deduct TDS with G Suite partners, instead of complicated way in case of paying directly to Google and claiming credit back.