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Nina Varghese

CHENNAI, May 17

WITH the Central Board of Direct Taxes (CBDT) dragging its feet on the issue of tax deduction at source (TDS) on incentives given to travel agents, airlines are going ahead and deducting tax on incentives at source.

The Board of Airlines Representatives (BAR) in India, Travel Agents Federation of India and Travel Agents Association of India have made representations to the CBDT, seeking to clarify the applicability of the provisions of Section 194H of the Income-Tax Act, 1961, on the amount of incentives or special commission paid to travel agents.

A note from an airline states that despite repeated reminders, the CBDT has issued no clarifications; on the contrary the IT department has raised demands on a number of airlines on the short deduction of tax on the special commission.

The airlines have decided to start deducting tax at source on the incentive amount, included in the payment received after April 1, 2002, at the applicable rate of 10.2 per cent April 1 to May 31 and 5.25 per cent with effect from June 1.

According to travel trade sources, in most cases the incentives are passed on to the passengers and are not income that accrues to the agents, so it is unfair to tax them on the incentives that the airlines pays them. Only the normal 7 per cent commission paid by all the airlines should be taxed, they contend.

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