Event Management Finance Simplified

Event Management is a part of the service sector and involves dealing with a large work force and a number of venders on a temporary basis. The kind of services delivered and the methods of delivering services are    diverse and dynamic. Compliance and accounting pose new and continuous challenges. Thus, the style of functioning of the Accounts Department is very different from that of any other service sector in the industry.

The amount of effort that the accounting team of an Event Management Company needs to put inside the office may be equal to or sometimes even more than the effort that the rest of the departments need to put in in towards the success of an event.

• An Event Manager is involved in providing varied kinds of experiences through a variety of services.  The number and type of vendors that he might choose may greatly differ from one event to another.

• Multiple venders for the same or similar event.
• Different venders for different events.
• Different venders for the same event every time.

Often even small events mean interaction with 500 to 1000 venders. To deal with so many is definitely a next level challenge for the accounting team as it needs to   keep track of each and every bill to be cleared of each of these venders in compliance with the various laws related to Income Tax, GST, TDS and so on.

• This requires constant and vigorous communication with each of these venders.
•  There is often need to look into their individual accounting systems and make related reconciliations.

In the context of the TDS, we often have several discussions and debates on 194J, 194c, Service and   Contract, I would like you to address these challenges  in order to be able to educate clients  and overtake the niche.

TDS, 194J and 194C

TDS / Tax Deduction at Source simply means that income earned in the current year is taxed in the year of appraisal. The government stipulates that companies are obliged to deduct taxes and pay deposits in advance according to the tax rate stipulated for different types of services. Different rates apply to different types of payments, such as wages, contracts, rents, commissions, and interest. 

194J – This is the TDS for professional, technical and royalty services 

194C – This clause provides a detailed definition of the term employment contract and the applicable TDS rates.

What is a Work’s Contract?

Event managers must sign a contract detailing their requirements or work orders. This includes a breakdown of the materials required for the services and activities provided. There are clear boundaries between material costs and activity manager service fees.

TDS for Event Management

If the customer caters for all the materials of the event and the event manager only needs to organize it, only the service components are included for the calculation of TDS. Here, it is recommended that the company impose mandatory taxes in accordance with 194J, that is, a 10% tax on the service part. Incident management is a service, in any normal circumstance, where at least 90% of the total value of the contract is used for materials. Only 10% can be the organization fee of the event administrator. Therefore, for the benefit of the contractor, only 2% is deducted as TDS. Event managers must wait to file income tax returns, evaluate their tax returns, and issue refunds. Until then, your income is still in the hands of the income tax department.

Two types of TDS for Event Management

People are often confused about the tax rate that must be taken into account when deducting taxes from the source. The structure is highly dependent on the way the contract is written and clearly mentions the components that have been outsourced. If done right, there can be two types of TDS, 10% below 194J and 2 or 1% below 194C.