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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Direct Tax Laws & International Taxation

Case: Kaveri Textiles Ltd, an Indian company, paid Rs 18,00,000 as professional fees to a resident chartered accountancy firm (a partnership) on 10 January. The firm has furnished its PAN. The company has not been asked to deduct at a lower rate. Assume the threshold for TDS on professional fees has been crossed during the year and the rate for professional fees is 10%. How much tax must Kaveri Textiles deduct at source on this payment?

Tax to be deducted is Rs 1,80,000 because payment of professional fees to a resident attracts TDS at 10%, and 10% of Rs 18,00,000 is Rs 1,80,000. The 2% rate applies to contract payments, not professional services, so it does not fit here.

  1. ARs 1,80,000Correct
  2. BRs 36,000
  3. CRs 90,000
  4. DRs 3,60,000

Explanation

Fees to a resident for professional services attract TDS at 10% under the section for fees for professional services. 10% of Rs 18,00,000 equals Rs 1,80,000. Rs 36,000 wrongly applies 2%, the rate meant for contractor payments to firms.

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