Section 194E: TDS Rates on Payments to Non-Resident Sportsmen or Sports Associations

Taxation of a non-resident entertainer, sports person etc.

Section 115BBA of the Income Tax Act provides a concessionary tax regime in the case of income of sports persons who are non-citizen and non-resident. The provision covers income received by way of participation in any game or sport, advertising or contribution of article in any newspaper etc.The same regime is also available to a non-resident sports association or institution for guarantee money payable to such institution in relation to any game or sport played in India.

Section 194E provides for tax rates on income received by any non-resident sportsman or sports association, not being a citizen of India, by way of participation in any game or sport in India, advertisement etc. The Finance Bill, 2012 has with effect from 1st July, 2012 proposed to include within the scope of this Section, income received by an entertainer, not being a citizen of India and being a non-resident, from his performance in India.

Tax shall be deducted at the rate 20% on such income. It shall be deducted at the time of credit or payment whichever is earlier.

The rate of tax Deduction at Source for FY 2015-16 or AY 2016-17 is as under as per Finance Bill, 2015:

Related Cases:

S. 2(7), 2(31), 115BBA & 194E  of IT Act, 1961—TDS—As per S. 115BBA, the sports personality can be subjected to tax only on receipt of the amount in respect of the transaction mentioned therein namely participation in India in any game or sport, income received or receivable by way of advertisement and income received or receivable by way of contribution of articles relating to any game or sport in India in newspapers, magazines and journals. However in case of nonresident sports association participation in game is not the criteria, relevant factor is payment of guarantee amount in relation to any game or sport played in India. Deduction of tax at source by the payer is one thing and obligation to pay tax is another thing. Therefore, obligation u/s 194E has to be discharged once income accrues u/s 115BBA irrespective of existence of DTAA—Pilcom vs. CIT (2011) 238 CTR 387 (Cal)

S.194E, r/w s.115BBA of IT Act, 1961 — Deduction of tax at source—The amount paid to the foreign team for participation in the match in India in any shape, either as prize money or as the administrative expenses, is the income deemed to have accrued in India and is taxable u/s 115BBA and, thus, S. 194E is attracted. However payments made to the umpires or match referees do not come within the purview of S. 115BBA because the umpires and match referees are neither sportsman (including an athlete) nor are they non-resident sports association or institution so as to attract the provision contained in S. 115BBA. Therefore, although the payments in question made to umpires or match referees are Income which accrued in India, yet, those are not taxable under the provisions of S. 115BBA of the Act and thus, the liability to deduction u/s 194E does not arise. Indcom vs. CIT (2011)

May 2011: Cal.: Income of a foreign cricket team for participating in a cricket match in India is taxable u/s 115BBA and therefore, S. 194E is attracted

• The amount paid to the foreign team for participation in the match in India in any shape, either as prize money or as the administrative expenses, is the income deemed to have accrued in India and is taxable u/s 115BBA and thus, S. 194E is attracted
• However, the payments made to the Umpires or Match Referees do not come within the purview of S. 115BBA because the Umpires and Match Referee are neither sportsmen (including an athlete) nor are they non-resident sports association or institution so as to attract the provisions contained in S. 115BBA, although the payments made to them are “income” which have accrued in India, yet, those are not taxable under the aforesaid provision and thus, the liability to deduct tax u/s 194E would never accrue.

Reference:

As Per Section 194E, of the Income Tax Act, 1961-

Payments to non-resident sportsmen or sports associations.

194E. Where any income referred to in S. 115BBA is payable to a non- resident sportsman (including an athlete) [or an entertainer] who is not a citizen of India or a non-resident sports association or institution, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of [twenty] per cent.

[Amendment of section 194E.

—In section 194E of the Income-tax Act, with effect from the 1st day of July, 2012,—

(a) after the words and brackets “is payable to a non-resident sportsman (including an athlete)”, the words “or an entertainer,” shall be inserted ;

(b) for the words “ten per cent.”, the words “twenty per cent.” shall be substituted.

Clause 70 of the Bill seeks to amend section 194E of the Income-tax Act relating to payments to non-resident sportsmen or sports associations.

This amendment will take effect from 1st July, 2012.]