What is TDS on Salary vs. TDS on Professional Fees?
Nexa Consultancy | Startup & Finance Glossary
TDS on salary (Section 192) is deducted based on the employee's applicable income tax slab rates after considering their declarations for deductions. TDS on professional fees (Section 194J) is deducted at a flat rate of 10%. Misclassifying an employee as a consultant can lead to incorrect TDS deduction and penalties.
Startup Example: A startup pays a full-time designer ₹80,000/month but treats them as a consultant and deducts 10% TDS. The tax authorities can reclassify this as a salary, leading to penalties for incorrect deduction.
We provide clarity on payroll and TDS compliance.