TDS Applicability on Retail Shop Branding Charges, Income Tax

[Ramanathan Seshan]

Dear Experts,

We have engaged a vendor to carry out branding activities for our retail outlets, which includes in-store branding, signage, and visual merchandising elements. Kindly advise whether TDS is applicable on the charges paid for such services. If so, under which section of the Income Tax Act should the deduction be made?

Regards,

S Ram

Posts / Replies

[YAGAY andSUN]

Yes, TDS (Tax Deducted at Source) is applicable on the charges paid to a vendor for branding activities such as in-store branding, signage, and visual merchandising.

✅ Nature of Service:

Branding activities typically fall under the umbrella of:

• Contractual services (if it's a composite contract for supply + installation),
• Or professional services, depending on the nature of the agreement and services rendered.

📌 Relevant TDS Sections (Income Tax Act, 1961):

✅ 1. Section 194C – TDS on Contracts

Applicable when:

• The branding services are part of a works contract, such as fabrication and installation of signage, display units, hoardings, etc.
• The vendor is executing a contract (not providing professional or consultancy services).

Rate of TDS under Section 194C:

• 1% – if the vendor is an individual or HUF
• 2% – if the vendor is a company, firm, etc.

Threshold limit:

• No TDS if a single payment is ≤ ₹30,000, or
• Aggregate payment in a financial year is ≤ ₹1,00,000

Conclusion: In most branding contracts involving materials, installation, and fabrication, Section 194C is the correct section to deduct TDS under.

🚫 Not under Section 194J – unless:

If the service is purely of a consultative or professional nature (like brand strategy, graphic designing, advertising consultancy), it may attract TDS under Section 194J (10%). But this seems less likely in your case.

📝 Recommendation:

• Review the scope of work in your vendor contract.
• If it involves execution of branding/fabrication/installation work, deduct TDS under Section 194C.
• Deduct at 1% or 2% depending on the vendor’s constitution.

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[Ramanathan Seshan]

Dear Yagay-sir,

Thanks for your valuable response.

Regards,

S Ram