TDS Applicability on Payments Made to Advertising Agency for Branding and Promotional Services, Income Tax

[Ramanathan Seshan]

Dear Experts,

We have hired an advertising agency to provide a range of services including product branding, packaging design development, logo creation, website development, and promotion on e-commerce platforms. We seek clarification on whether TDS is applicable on the consolidated charges paid to the agency for these services. If applicable, under which section of the Income Tax Act should the deduction be made?

Regards,

S Ram

Posts / Replies

[YAGAY andSUN]

Yes, TDS is applicable on the consolidated charges paid to the advertising agency for the range of services you described. However, the applicable TDS section depends on the nature of each component of the service. Since you're paying a consolidated amount, we need to evaluate whether it's a contract for professional services or advertising services.

✅ Services Provided:

Your agency is offering:

1. Product branding
2. Packaging design development
3. Logo creation
4. Website development
5. E-commerce promotion

These are a mix of advertising, creative/professional services, and technical/digital services.

📌 TDS Applicability:

✅ 1. Section 194J – TDS on Professional Services

Applicable when:

• Services involve professional or technical skill, like design, branding, logo creation, digital marketing, and website development.

Since most of your services are creative and professional in nature, TDS under Section 194J is applicable.

Rate:

• 10% (on the amount excluding GST, if GST is shown separately)

✅ 2. Section 194C – TDS on Advertising (if applicable)

• If there’s a distinct component of advertising (like newspaper or TV ads handled directly by the agency), TDS @ 1% is applicable under Section 194C.
• However, promotion on e-commerce platforms (e.g., Amazon, Flipkart, etc.) and digital marketing is typically treated as professional/technical services rather than pure advertising.

If the entire scope is covered under design, branding, and digital promotion, it's safest to deduct TDS under Section 194J.

🧾 How to handle consolidated payments:

• If the invoice clearly splits services into:
  • Design, development (→ Section 194J)
  • Advertising spend (→ Section 194C)

Then you may deduct TDS accordingly.

• If not split, and it's a single consolidated charge for professional and creative services:
  • Deduct TDS under Section 194J (10%).

🚨 Important Notes:

• TDS must be deducted at the time of credit or payment, whichever is earlier.
• If GST is separately shown, deduct TDS on the base amount excluding GST (CBDT Circular No. 23/2017).

✅ Summary Table:

Service	Likely TDS Section	Rate
Branding, logo, packaging design	194J (Professional)	10%
Website design & development	194J (Technical)	10%
E-commerce promotion	194J (Digital Services)	10%
Media buying (if any)	194C (Advertising)	1%