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Event Management Finance Simplified

Watch the Expert Session:

What you will learn:

  • How different is Event Finance from that of any other industry that you have been dealing with?
  • What are the challenges in Event Management from finance perspective and how could these be streamlined?

  • What is TDS and two types of TDS for Event Management?

How different is Event Finance from that of any other industry that you have been dealing with?

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.

What are the challenges in Event Management from finance perspective and how could these be streamlined?

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 kind of experiences through variety of services.  The number and type of venders that he might choose may greatly differ from one event to another.
    • Different venders for the same event every time.
    • Multiple venders for the same or similar event.
    • Different venders for different events.

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.   Income earned in the current year is taxed   in the Assessment Year. The Government imposes a responsibility on the companies to deduct  tax at a  rate specified by the provisions for different kind of services and deposit with it in advance.  There are different rates applicable for different kind of payments like salary, contracts, rents, commissions, interests etc.

 194J: This is TDS on professional, technical, royalty services

  194C:   This   provision gives detailed definition of the word Work’s Contract and the TDS rates applicable.

What is a Work’s Contract?

An Event Manager needs to get into a contract detailing his requirement or Work Order.  This has a   breakup of the services being provided and materials required for the event .  There is a clear demarcation of the material cost and the Event Manager’s service fee.  

TDS for Event Management

If the client is arranging all the materials for the event and the Event Manager is only required to organize it, then there is only the service component being provided. Here the companies are suggested to compulsorily tax under 194J that is 10% levied for the service component. 

 Event Management is a service where at least 90% of the entire contract value in any normal situation is used for material.   Only 10% could be the Event Managers organizing fee.   Hence for the benefit of contractors, only 2 % is being deducted as TDS.   If the clients end up deducting 10% of the entire contract value of the invoice that they would be producing, they would basically be eating away the entire chunk of whatever is  only eligible for Event Managers.  Therefore, they will end up only breaking even.  Event Managers will have to wait until the Income Tax Returns are filed, their Tax Returns are Assessed  AND THE refunds are issued.  Till then their profits are held up with the Income Tax Department.

Two types of TDS for Event Management

 There has often been a confusion about the rate that one needs to consider for deducting tax at source.  The structure largely depends on the way the contract has been worded with a clear mention of the component that has been subcontracted.  If this is done well    there would be possibility for two kinds of TDS, the 10% under 194J and  the 2 or 1 % under 194C.  Several notifications have already been issued by the Income Tax Department in this regard