Confusion about Honorarium and Statutory Compliance
Confusions
Is TDS applicable on honorarium?
Should we deduct PF from honorarium?
Is honorarium considered equal to salary?
Does honorarium will consider as fees or consultancy
How to deduct professional tax from Honorarium?
Lots of confusion regarding honorarium and there is no statutory implications given in the Acts rules and define clearly what is honorarium however below is the dictionary meaning of honorarium
An honorarium is a small fee paid for a service that is usually done for free. It’s more of a thank you than a real, substantial paycheck.
It is clear from the above definition that the amount should not be substantial but a small fee is to be considered as honorarium. However, we have seen so many organisations in the budget using this word for the purpose of staff payments. And thus the confusion arises, is it treated as salary or should it consider as consultancy fee?
Irrespective of wordings of Approved Budget, it is highly recommended to look into the rules and regulations of the Act. Let us clear one by one with the statutory act applicable to it.
Income tax
As per the income tax Act, there is no word define as “honorarium”. But it is sure that honorarium should be considered as Income and person receiving it should pay tax on it if applicable.
TDS
TDS is a liability on NGO to deduct from the payment to staff if limit crosses. The honorarium is no exception. Need to deduct TDS on it either as a salary or as consultancy, depending upon agreement/appointment letter/contract between staff and NGO. Thus TDS is to be deducted on honorarium if treated as regular salary (sec 192), as per basic exemption limit stated in the Income Tax Act of relevant Assessment Years. If honorarium treated as consultancy(sec 194J), then deduct TDS at 10%, if basic limit crossed.
Check out this TDS chart:- https://www.incometaxindia.gov.in/Pages/charts-and-tables.aspx
But do not consider it as a contract and deduct as 1% u/s 194C. Honorarium can not befall under the definition given in section 194c.
Provident Fund
PF authorities always considered Honorarium as Salary. If your organization falls under the PF Act, and regular payments are made to the staff, PF should be deducted and paid.
Professional tax
Even professional tax authorities consider the Honorarium as Salary and asked to deduct Professional Tax.
Conclusion
So, Honorarium is very very vague word And need more clarification. It is advisable to make it very clear that payment to staff is either in the form of Salary or Consultancy Fees irrespective of the wording used in the approved budget.
Have doubts or want to share your thoughts, write in the comment section below.
It is better to comply to either TDS or PF/ESIC on any payments. It does not matter if it is a salary or an honorarium. It is better for the organizations to ensure deductions as per the law of the land to be on the safer side.
You are absolutely right sir.
A volunteer is given honorarium in lieu of his service rendered to any organisation or group, registered or otherwise. A volunteer fills in a form or applies for his willingness to serve without salary or emoluments. A volunteer is not an employee within the meaning of the word. What will be the law applicable pertaining to TDS, PF, ESIC or any other statutory requirements?
In such a case, not only the consent form, but other things also matter. If the authority finds that the volunteer is giving regular services and there is a deemed employer-employee relationship between NGO and volunteer. Then it will be treated as salary. e.g. if a person has contributed his time in 5 days event of NGO and in return some amount has been paid. That can be count as honorarium. But if, he is bound to visit office/field on a regular basis with time-bound. This may be count as salary.
The honorarium paid to the staff working in NGOd is much less compared to that of their counter parts working in regular sector of both Government or Private. Such staff don’t get increase in honorarium, no pension, not any other benefits. NGOs expect more work to be done with difference. In such situations the staff who get honorarium should be exrmpted from PF, TDS, TAX etc.
That’s the irony. But laws of the land can not discriminate between the person on the basis of their working sector. Also, if they are getting less paid etc.. it is our fault, we can not raise enough money, we can not bargain with donor/funding agency about staff payments etc…
I don’t understand about contracts of 194j is deducted 10% TDS.
Example: monthly pay Rs.10000, cut TDS Rs. 1000 is true? This person is not cross basic limit.
30000 limit is per year.
A foreign national is appointed as a volunteer for a period of 12 months on a honorarium of Rs 10,000/pm. the person has obtained an ’employment visa’ and also approval from FRRO.
in this case is TDS applicable? if Yes, will it be under Sec 194 or Sec 195 and at what rates?
Does the foreigner need a PAN card?