M/s Crystal Wash Pvt. Ltd., a domestic company engaged in the business of manufacturing and selling washing powder and bars, hires agents to promote…
CA Final · Direct Tax Laws and International Taxation · MTP · January 2026
M/s Crystal Wash Pvt. Ltd., a domestic company engaged in the business of manufacturing and selling washing powder and bars, hires agents to promote and boost sales of its products by paying them incentives and commission based on the sales achieved through them. During the P.Y. 2024-25, Mr. Mohan Kumar, a resident individual, worked as an agent for the company. The company paid him commission of 1,55,000 on 21 st July 2024 for achieving the sales target of Quarter 1,1,80,000 on 10 th January 2025 for achieving the sales target of Quarter 3, and other incentives amounting to 1,60,000 on 15 th January 2025 are given as reimbursement for booking air tickets for an event in Singapore for Mr. Mohan Kumar and his family members who accompanied him. Additionally, the company gave Mr. Mohan Kumar a laptop worth - 80,000 in October 2024 for achieving the sales target for the month of September 2024. Examine the applicability of tax deducted at source/tax collected at source and calculate the amount of TDS as per the provisions applicable for A.Y. 2025-26
Suggested Answer and Working Notes:
M/s Crystal Wash Pvt. Ltd is required to deduct tax at source on commission paid to Mr. Mohan Kumar under section 194H @5% till 30.9.2024 and @2% from 1.10.2024, being sum exceeding - 15,000. Reimbursement of expenses of 1.6 lakhs for booking air tickets for Mr. Mohan Kumar and his family and laptop of 80,000 for achieving sale target is benefit or perquisite arising to Mr. Mohan Kumar from his business or the exercise of his profession, being sum exceeding - 20,000. Accordingly, M/s Crystal Wash Pvt. Ltd is required to deduct tax at source under section 194R @10%. Tax to be deducted under section 194H = 5% on 1,55,000 + 2% on 1,80,000 = 11,350 Tax to be deducted under section 194R = 10% on 1,60,000 (Air tickets) +80,000 (laptop) = 24,000
Topics: Deduction, Collection and Recovery of Tax
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