TDS Deduction for Retainer Agreements: Do We Need to Deduct and How?

TDS Deduction for Retainer Agreements

Should we deduct TDS for a person who is on a retainer agreement with our organization? If yes, how should we deduct it? Please guide me.

Yes, you need to deduct tax at the source for a person who is on a retainership agreement. Tax has to be deducted at 10.3% of the gross amount of the bill. Hope this helps you.

Regards,
Avika Kapoor
Assistant General Manager - Business Development

Could you please elaborate on the meaning of a person on a retainer ship agreement? If the person is a professional, then the TDS will be at 10%. However, if it is a contract, the TDS may be different. Please let me know about it.

Regards,
Atul Somani

As I understand it, you have to deduct 10% TDS from his monthly bill, and you don't need to deduct professional tax.

Regards,
Rajendra V

I just want to correct you, as the TDS % on professionals is 10%, not 10.3%. Please do not mind.

Regards,
V.K. Gupta

TDS Deduction for Retainership vs. Employer-Employee Relationship

The TDS of 10% is deducted only if it is purely retainership. In the case of an employer-employee relationship existing (e.g., a retired employee working in the same organization on a contractual basis), then the full tax, as applicable to salary, needs to be deducted.

Regards,
Gopal

Any person working as a retainer (under a retainership agreement) will fall under the category of Professionals. The applicable TDS will be at 10% only on the total amount paid to him/her. The total payment (in that particular financial year) must exceed Rs 30,000 for TDS deduction. PAN is compulsory for all deductors; otherwise, TDS shall be deducted at 20% w.e.f. 01.04.2010. Professional tax will not be applicable.

Regards

In the instant case, the applicable TDS will be at 10% only and not 10.30% as mentioned by you. You should know that no surcharge and education cess are applicable from 19th August 2009 on TDS deductions for professionals. Please provide clarification to remove the unnecessary doubts of the readers.

Regards,
Kamal Prasoon Sinha
19-12-2010
Pune

Yes, tax has to be deducted at the source under section 194J. I furnish below key points relating to this provision.

Rate of Tax: Tax to be deducted at 10% (No need to deduct education cess of 3% on the tax amount with effect from 01-10-2010). If the PAN number of the retainer is not obtained, tax to be deducted at 20%.

Time of Deduction: Deduction has to be made at the time of crediting the retainer's account in the books or at the time of payment, whichever is less.

Remittance of Tax: The amount deducted has to be deposited to the central government account through the designated bank. Remittance has to be made by using the E-payment option (Direct tax payment).

Due Date for Remittance: On or before the 7th of the immediate subsequent month. For example, if deduction is made on, let's say, 12th November 2010, remittance has to be made on or before the 7th of December 2010.

Interest for Delayed Remittance: If TDS is not remitted within the due date, interest at 1.50% per month has to be paid. Part of the month is to be treated as one full month.

Filing of ETDS Return: Quarterly TDS return needs to be filed in electronic form in Form 26Q. RRR number, which is the ETDS filing acknowledgment number, has to be quoted in the TDS certificate.

Issue of TDS Certificate: TDS certificate (Form 16A) with the PAN number of the deductee (Retainer) has to be issued every quarter.

The thing is you need to deduct TDS on a retainership bill at 10% in the respective bill he claims, provided the total retainership fee does not exceed Rs. 20K during the financial year. Otherwise, it's not mandatory. Further, professional tax doesn't apply in this case. If you are subject to the deduction of TDS, you may have to remit it to IT on a quarterly basis through form 26A on Q1, Q2, Q3, and Q4 Challans. Finally, issue a TDS Certificate of form 16A, see rule 31(1)(b), to the concerned retainer on an annual financial year basis, showing all payments of retainership along with tax deducted at source to enable him to file his annual return for claiming tax adjustment/refund as the case may be. Hope the above shall suffice your requirements.

Regards,
Devarajan.N

For the current financial year (2010-2011), TDS is applicable if the total paid amount exceeds Rs 30,000 and not Rs 20,000 as mentioned by you. My humble request is to clarify your input on the subject.

Regards,
Kamal Prasoon Sinha
20-12-2010
Pune

You must deduct the tax at 10% on the gross amount of the bill. If your organization is covered under ESI and PF, then you should also deduct the ESIC and PF amounts. This will help you in your future audit of ESI and PF; otherwise, you will be liable for audited liabilities.

Regards,
Jagtap Dinesh
Sr. Manager Budget, Finance & Accounts
Induction Group
Nashik - Maharashtra
[Phone Number Removed For Privacy Reasons]

TDS on Retainership Fee

TDS on retainership fee. The retainership fee agreement is in the nature of consultancy. TDS will attract @10% u/s 194J, so you have to deduct 10% tax on the gross bill.

With regards,
Manoj Kumar Singh

Unless you clarify what your arrangement is with your so-called "Retainer," it may not be appropriate to give you the proper advice. This could apply to an employee, consultant/professional such as a CA, Lawyer, Architect, etc., or a contractor. Please clarify.

For retainership/professionals, the deduction of PF & ESI is dependent upon the employment contract. If it is mentioned in the employment contract that the employer will deduct/contribute PF & ESI, then only it's applicable; otherwise, not.

PF & ESI deduction is not applicable in all such cases. Only TDS deduction under section 194J is applicable in all cases.

Regards,
Kamal Prasoon Sinha
21-12-2010
Pune

Dear Friends, I retired on 3rd September 2010. From 1st October 2010, my company appointed me as a consultant with a consolidated salary of Rs. 50,000 per month (No other perks). Now every month I am paid Rs. 45,000 after deducting 10% TDS. I would like to know whether TDS is applicable to me or not? If yes, do I need to collect a TDS certificate every three months or at the end of the financial year? Can anyone guide me?

His Blessings,

Sharad (Ahmedabad) [Phone Number Removed For Privacy Reasons]

TDS Applicability for Retainer Agreement

TDS is applicable in your case under section 194J. The company will provide you with a TDS certificate (Form 16A) at the end of the financial year.

Regards,
Kamal Prasoon Sinha

If any person retires from the organization and is appointed as a Retainer, in that case, what will be the rate of TDS?

Hi,

If a person is hired for 25 days on a retainer basis with a total salary of Rs. 11,096 to be paid to him, then what deductions should be made in terms of TDS?