Till now the tax has to be deducted on the gross amount paid or payable covered under chapter XVII-B including service tax thereon, except in case of payment of rent covered under section 194J of the Income-tax Act, 1961 where CBDT had clarified that tax was not required to be deducted on service tax component on rent.
CBDT has recently clarified vide its Circular No.1/2014 dated 13th January, 2014 that tax is not required to be deducted under Chapter XVII-B on service tax component comprised in amount paid/payable to a resident if service tax shown separately.
Points to be noted
- Exemption is available only when amount is paid/payable to a resident
- Exemption is available only when service tax is shown separately
- Exemption is available in respect of all payment covered under Chapter XVII-B. Therefore the payments in nature of contractors, subcontractor, insurance commission, professional or technical charges, Royalty etc.
The above clarification is depicted by way of following illustration
|Particulars||Earlier position||Recent position|
|Amount of professional service||10000||10000|
|Service tax @ 12.36%||1236||1236|
|TDS @ 10%||1124||1000|
There in view of above clarification, tax required to be deducted in above is illustration is 1000 (not 1124 which required to be deducted before clarification)