Section 194E of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on payments made to non-resident sports professionals, entertainers, or sports associations for income earned in India. This ensures tax compliance on earnings from sports events, performances, or related activities.
1. Applicability of Section 194E
✅ Covered Payments:
- Fees(participation, prize money, appearance).
- Advertising income(e.g., endorsements).
- Article contributions(newspapers/journals related to sports).
- Guaranteed paymentsto sports associations for events in India.
❌ Exclusions:
- Card games/gambling income.
- Income earned outside India.
2. Who Deducts TDS?
- Payer: Any entity (individual, company, tournament organizer) making payments to:
- Non-resident athletes/sportsmen(non-Indian citizens).
- Non-resident entertainers(e.g., musicians, actors).
- Non-resident sports institutions/associations.
3. TDS Rate & Calculation
| PARAMETER | DETAILS |
| Base Rate | 20% (excluding cess). |
| Including Cess | 20.8% (20% + 4% Health & Education Cess). |
| PAN Not Provided | Higher rate (as per Section 206AA, typically 20.8% + surcharge). |
| Timing | Deduct at the earlier of: |
- Credit to payee’s account.
- Actual payment (cash/cheque/draft). |
Example:
- Payment: ₹10 lakh to a foreign cricketer.
- TDS (20.8%): ₹2.08 lakh.
- Net Payment: ₹7.92 lakh.
4. Key Provisions of Section 115BBA
- Tax Treatment: Income under Section 194E is taxed at 20% flatunder Section 115BBA.
- No Deductions: Expenses (e.g., training costs) cannot be claimed.
- Surcharge: Applicable if income exceeds ₹1 crore (e.g., 10% surcharge for ₹1–10 crore).
5. Compliance Requirements
- TDS Deposit: By the 7th of the next month(March: April 30).
- TDS Return: File Form 27Q
- Certificate: Issue Form 16Ato payee.
6. Penalties for Non-Compliance
- Late Deduction: Interest @ 1% per month.
- Late Payment: Interest @ 5% per month.
- Incorrect Filing: Penalty up to ₹1 lakh.
Key Points
🔹 Flat 20% TDS (+ cess) on payments to non-resident sports/entertainment professionals.
🔹 PAN Mandatory to avoid higher deduction (20.8% + surcharge).
🔹 No Expense Claims: Payees cannot deduct costs under Section 115BBA.
🔹 Quarterly Filing: Use Form 27Q for TDS returns.
