Sportspersons will have to cough up more tax upfront
August, 29th 2008
Sportspersons will have to cough up more tax upfront. The Central Board of Direct Taxes (CBDT) has expanded the scope of professional services to cover sportspersons, umpires and referees, making them liable for a higher tax deduction at source (TDS) at the rate of 10% against 1-2%.
The move, however, will not hurt sportspersons who are amateurs and do not play for commercial gain as a separate exemption has been provided this. Put simply, when the countrys Olympic medal winners Abhinav Bindra, Vijender Kumar and Sushil Kumar receive reward from various governments, they wouldnt have to pay tax on them.
As per the notification, the CBDT has categorised services rendered by sportspersons, umpires and referees, coaches and trainers, team physicians and physiotherapists, event managers, commentators, anchors and sports columnists as professional services. The professionals were covered by Section 194C of the Income-Tax Act, which made them eligible for a lower TDS rate of 1-2%. With this notification, they would now be covered under 194J of the I-T Act.
As per the provision, if the fee for professional or technical service contract undertaken by any of the professionals exceeds Rs 20,000, tax has to be deducted at 10% at the time of payment by the contract awardee. The government had hiked TDS rate from 5% to 10% in Budget 2007. Currently, persons rendering medical, engineering or architectural, accountancy, technical consultancy and interior decoration services are covered under the provision.
Although the move that comes close on the heels of the India Premier League (IPL) tournament will cover all sportspersons, it is likely to hurt cricketers the most. It may be pointed that the tax deducted can be claimed as a refund after filing I-T return if the taxpayer has no liability.
However, it is an irritant as it blocks ones funds for a short period of time. TDS is seen as a non-invasive way of collecting tax and the government is giving special emphasis on this. CBDT has created a special directorate to monitor TDS collections that have been growing by over 50%.