Kamal Hassan has no TDS obligation but Kalanithi Maran has TDS obligation?

In the world of glitz and glamour, the complexities of taxation often take center stage. Two prominent figures in the entertainment industry, Kamal Hassan and Kalanithi Maran, have found themselves in a scenario that raises questions about Tax Deducted at Source (TDS) obligations. The crux of the matter lies in the gifts presented to their respective directors, Lokesh Kanagaraj and Nelson Dilipkumar, to celebrate the astounding success of their movies. Let’s dive into the details and analyze why Kamal Hassan may have no TDS obligation, while Kalanithi Maran does.

Detailed Analysis:

The scenario involves two distinct events:

i. Kamal Hassan’s Gift to Lokesh Kanagaraj: On June 7, 2022, Kamal Hassan gifted a car to director Lokesh Kanagaraj to commemorate the success of their movie “Vikram,” which hit the theaters on June 3, 2022.

Picture Source- Twitter Handle @Dir_Lokesh

ii. Kalanithi Maran’s Gift to Nelson Dilipkumar: On September 1, 2023, Kalanithi Maran presented a car to director Nelson Dilipkumar, celebrating the triumph of their movie “Jailer,” which was released on August 10, 2023.

Image Source- Twitter Handle: @sunpictures

Now, let’s dissect the tax implications for both recipients and producers.

Taxability in the Hands of the Recipient:

According to Section 28(iv) of the Income Tax Act, 1961, the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession is taxable. In this case, both directors, Lokesh Kanagaraj and Nelson Dilipkumar, are engaged in a profession, and the gifts they received are considered taxable under this provision.

Taxability in the Hands of Producers:

To understand the tax obligations of the producers (Kamal Hassan and Kalanithi Maran), we must refer to Section 194R of the Income Tax Act, which was introduced on July 1, 2022. Section 194R mandates that any person responsible for providing benefits or perquisites to a resident must ensure that tax is deducted at a rate of ten percent of the value or aggregate value of such benefit or perquisite.

Here’s how the timeline of events plays a crucial role in determining TDS obligations:

i. June 7, 2022: Kamal Hassan’s gift to Lokesh Kanagaraj occurred before the introduction of Section 194R. As a result, Kamal Hassan may not have a TDS obligation for this gift.

ii. July 1, 2022: Section 194R came into force, affecting the tax landscape.

iii. September 1, 2023: Kalanithi Maran’s gift to Nelson Dilipkumar took place after the implementation of Section 194R, implying that Kalanithi Maran is obligated to deduct TDS on the gifts presented to the “Jailer” team.

Conclusion:

The nuances of taxation often weave a complex web, even in the glamorous world of entertainment. In this case, while Kamal Hassan may escape the TDS obligation for a gift given before a particular tax provision’s implementation, Kalanithi Maran finds himself under the purview of the law due to gifts presented post its enactment. This scenario highlights the importance of staying updated on evolving tax laws and their timing, ensuring compliance and avoiding any unforeseen tax liabilities. Please note that tax laws are subject to change, and it’s advisable to consult with tax experts for the most current guidance.