Honorarium vs Professional Fees, Income Tax

[DEV KUMAR KOTHARI]

HONORARIUM VIS A VIS PROFESSIONAL FEES -REVISED ISSUE TO SEEK MORE VIEWS Fees is for services renderd on request and authorization by the client. It is decided mutually. On other hand honorarium is not for any services renderd on request and authorization to do work or as per agreement- the work as well as honorarium both are voulntarily. An author submit article without any obligation, the same may be published or not.The publisher may or may not pay honorarium even after publication of article.The honorarium is not mutually decided. It is paid as an honor or regard and not as consideration for service or goods, provided voluntarily. Therefore, honorarium e.g. to author of articles, is not in nature of porfessional or technical fees to which provisions of Section 194J apply. Honorarium is generally very small amount considering rate of professional fees for such work honorarium is a fraction of usual fees ranging between 5-25% of usual fees, depending on stature of the author.Thus, honorarium cannot be regardes as professional fees by any count. However, as usual tax authorites may raise dispute, demand that tax should have been deducted and deposited. If the requirement is not complied with honorarium paid may be disallowed u/s 40(a)(ia). In case of regular authors, the A.O. can consider that there is some sort of understanding between the publisher, website and author/ contributor. Articles invited are in a sense offer made and on publication of article, there is a contract.Therefore, to play safe tax may be deducted from honorarium, wherever applicable, considering honorarium as fees for professional or technical services. The deduction may be without prejudice and to avoid disputes, so that the A.O. does not claim that in earelier years tax was not deducted and there was default. Readers and particularly authors who receive honorarium are requested to send their views with other supporting material.

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[CA UMA KOTHARI]

No doubt honorarium is not fees because of the distinctions as pointed out by Mr. Dev Kumar Kothari, and as generally understood by people in the related area. However, there is no harm if tax is deducted and deposited, because author can get credit for the same and adjust against his tax liability. There will be no contingency about various likely proceedings. Authorship of books is no doubt professional service and it will be covered for TDS if book is written by a person carrying specified/ notified professions. Authorship of articles can be regarded as 'professional service' within the meaning of the expression given by way of explanation in S. 194 J Therefore, in case of regular authors where annual honorarium exceed prescribed limit tax can be deducted , by following play safe and avoid contingency rules.