SUBJECT: DEDUCTION OF TAX UNDER SECTION 50(4A) FROM AIR TRAVEL AGENTS – CLARIFICATION REGARDING.

According to amendment made in Section 50(4A) vide Finance Act, 1999, tax withheld from brokerage/commission @ 10% has been made full and final discharge of tax liability. Withholding of tax u/s 50(4) in respect of services rendered by the persons other than doctors, lawyers, accountants, auditors, architects, surveyors, actuaries, engineers, advisors and consultants has also been made full and final discharge of tax liability.

2. It has been brought to the knowledge of the Board that in certain cases e.g. air travel agents, advertising agents, tax is being withheld under both the above mentioned sub-sections of section 50 from one and the same payment. The purchaser of air ticket deducts tax @ 5% u/s 50(4) from the payment which is inclusive of travel agent’s commission while on the other hand the principal withholds tax u/s 50(4A) @ 10% from the commission paid to the same agent.

3. The above situation is likely to create hardship for such agents. To remove this hardship, the Commissioner of Income Tax may issue exemption certificates under clauses (b) of sub-section (4) of Section 50 if tax is being deducted/paid @ 10% u/s 50(4A) promptly as clarified in Board’s Circular No.6 of 1999 dated 17-7-1999. However, in case irregularities are found in deduction/deposit of tax u/s 50(4), the exemption certificate issued may be cancelled.

(Saghri Alam Khan)

Secretary (Withholding Tax)

Ph. 9201448

___