No TDS on Liquor in Event Management & Hotel Invoices under Section 194C

 By CA Surekha Ahuja

Legal & Compliance Guide for FY 2025–26 & FY 2026–27

Where a hotel, banquet operator, caterer or event management company raises a composite invoice including:

• Accommodation
• Banquet charges
• Catering / food
• Event execution services
• Liquor supply

the liquor component is not liable for TDS under Section 194C.

TDS under Section 194C applies only on the non-liquor portion of the invoice.

Statutory Basis — Section 194C

Section 194C(1) applies to payments made to a contractor for carrying out any “work”.

Threshold Limits

Particulars	Limit
Single payment	₹50,000
Annual aggregate	₹1,00,000

TDS Rates

Payee Category	Rate
Individual / HUF	1%
Others	2%

Most Critical Provision — Explanation (iii) to Section 194C

Explanation (iii) includes within “work”:

• Catering
• Advertising
• Broadcasting
• Carriage contracts
• Manufacturing/supply as per customer specification

However, the Legislature specifically excludes:

“manufacturing or supply of liquor”

from the scope of “work”.

Legal Impact of the Exclusion

The exclusion is statutory and unconditional.

Therefore:

Component	TDS u/s 194C
Banquet/event services	Applicable
Catering/food	Applicable
Staffing & coordination	Applicable
Liquor supply	Not Applicable

Why Composite Invoicing Does Not Change the Position

Composite billing cannot override statutory exclusion because:

1. Section 194C applies only to “work”.
2. Liquor supply is expressly excluded from “work”.
3. Charging provisions must be interpreted strictly.
4. Invoice structure cannot expand the scope of the law.

Thus, liquor value remains outside the TDS base even in bundled contracts.

Applicability Across Hospitality & Event Industry

Scenario	Liquor Excludible?
Event management contracts	Yes
Hotel banquet invoices	Yes
Corporate conferences	Yes
Wedding packages	Yes
Event company paying hotel	Yes
Separate liquor invoice	Completely outside 194C

Correct TDS Computation

Composite Invoice Example — ₹25,00,000

Particulars	Amount	TDS Applicability
Accommodation & banquet	₹12,00,000	Yes
Food & catering	₹8,00,000	Yes
Liquor supply	₹5,00,000	No
TDS Base	₹20,00,000
TDS @2%	₹40,000

CBDT Circular No. 13/2006 — Correct Reading

CBDT clarified that execution contracts and labour supply fall under Section 194C.

However, the Circular does not override the statutory exclusion relating to liquor supply.

Accordingly:

Nature of Payment	Position
Event execution services	Covered
Catering services	Covered
Liquor product value	Specifically excluded

Important Distinction — Product vs Service

Component	TDS Position
Liquor product cost	No TDS
Bartender/service charges	TDS applicable
Event staffing	TDS applicable
Bar setup/management services	TDS applicable

The exclusion applies only to liquor supplied as product and not to independent service components.

Compliance Framework

Step 1 — Identify Liquor Component

Where separately disclosed:

• adopt actual value.

Where composite billing exists:

• prepare reasonable bifurcation based on:
  • package structure,
  • guest count,
  • menu composition,
  • industry standards.

Step 2 — Maintain Documentation

• Vendor invoices
• Quotations/package details
• Internal working sheets
• Event agreements
• Menu/liquor details

Step 3 — Deduct TDS Only on Eligible Portion

Computation Principle

$\text{TDS Base} = \text{Total Invoice} - \text{Liquor Value}$

Important Practical Clarifications

Issue	Position
Separate liquor invoice mandatory?	No
Estimated bifurcation allowed?	Yes, if reasonable
GST impacts exclusion?	No
Small liquor value ignored?	No
Form 26Q reporting	Report taxable portion

Final Legal Position

On a combined reading of:

• Section 194C(1),
• Explanation (iii) to Section 194C,
• the statutory exclusion relating to liquor supply,
• and settled principles of strict interpretation of TDS provisions,

the legally sustainable position is:

the liquor component embedded in composite hotel, banquet, catering or event management invoices does not form part of the amount liable for TDS under Section 194C.

Accordingly:

• TDS is deductible only on the non-liquor component;
• composite invoicing does not nullify statutory exclusion;
• and reasonable bifurcation with documentation should be maintained

Charitable Trust Formation, Registration, Public Donation Governance & Welfare Compliance in India

 From Seed Funding to Public Trust

By CA Surekha Ahuja

“A charitable institution is not built merely by registration papers or donations received.
It is built by public trust, fiduciary discipline, lawful governance, and transparent welfare utilisation.”

Vision & Legal Philosophy of a Charitable Institution

A genuine charitable institution is not merely a legal registration structure. It is a fiduciary public welfare mechanism where:

• founders contribute seed capital,
• trustees administer funds in fiduciary capacity,
• society contributes donations and public trust,
• funds are utilised exclusively for charitable purposes,
• and the institution remains accountable to beneficiaries, donors, regulators, auditors, and law.

The institution must therefore ensure:

Core Principle	Governance Objective	Tax Objective	Public Objective
Public benefit	Fiduciary discipline	Exemption continuity	Welfare delivery
Transparency	Audit trail	Section 11 protection	Donor confidence
No private enrichment	Section 13 safeguards	80G sustainability	Ethical governance
Controlled utilisation	Financial integrity	Compliance continuity	Long-term credibility

Governing Legal Framework

Provision	Subject Matter	Practical Relevance
Section 2(15)	Charitable purpose	Object qualification
Sections 11 & 12	Income exemption	Core exemption framework
Section 12A	Conditions for exemption	Audit/books/return filing
Section 12AB	Registration mechanism	Mandatory registration
Section 13	Violations & denial	Most critical risk provision
Section 80G	Donor deduction approval	Donation ecosystem
Section 115BBC	Anonymous donations	Donor identity control
Section 115BBI	Specified income taxation	Violation taxation
Section 115TD	Accreted income tax	Exit/restructuring risk
Rule 17A	Documentation framework	Filing compliance

Lifecycle of a Charitable Institution

Phase	Objective	Key Compliance
I	Founder seed structuring	Trust deed
II	Legal constitution	Registration
III	Tax activation	12AB & 80G
IV	Donation mobilisation	Donor controls
V	Welfare utilisation	Section 11 application
VI	Audit & reporting	Audit & ITR
VII	Long-term governance	Ongoing compliance

PHASE I — FOUNDERS’ SEED FUNDING & INITIAL STRUCTURING

Seed Money by Founders

The initial contribution by founders generally constitutes:

• initial corpus,
• settlement contribution,
• or institutional seed funding.

This establishes:

• institutional credibility,
• banking capability,
• operational readiness,
• charitable intent.

SOP for Founder Funding

Particulars	SOP Requirement	Documentation	Critical Caution
Mode of contribution	Banking channels only	Bank proof	Avoid cash-heavy funding
Nature of contribution	Corpus/general donation clarity	Founder declaration	Misclassification risky
Accounting treatment	Separate corpus ledger	Corpus register	Incorrect accounting may trigger dispute
Trustee approval	Resolution/minutes	Governance records	Important for transparency
Utilisation controls	Welfare-only use	Internal SOP	No personal usage
Founder KYC	PAN/Aadhaar/address proof	KYC file	Required for audit trail

Founder Funding — High-Risk Areas

Risk Area	Exposure	Consequence
Personal expenses through trust	Section 13 violation	Exemption denial
Cash introduction without explanation	Source scrutiny	Audit issues
Founder-controlled vendors	Related-party exposure	Specified person violation
Unsupported reimbursements	Governance failure	Litigation risk
Excessive founder control	Genuineness challenge	Registration scrutiny

PHASE II — FORMATION & LEGAL CONSTITUTION

Choice of Structure

Structure	Suitable For	Governance Strength
Public Charitable Trust	Welfare/social activities	Strong
Society	Membership NGOs	Moderate
Section 8 Company	Institutional/CSR organisations	Very strong

Trust Deed — Constitutional Backbone

The trust deed is the:

most critical legal and tax document.

Weak drafting is one of the biggest reasons for:

• rejection of 12AB,
• 80G objections,
• Section 13 disputes,
• donor mistrust,
• and governance litigation.

Mandatory Trust Deed Clauses

Clause	Purpose	Tax Relevance	Drafting Caution
Object clause	Charitable qualification	Section 2(15)	Avoid commercial wording
Application clause	Welfare-only utilisation	Section 11	No private diversion
Non-profit clause	Public character	80G	Mandatory
Investment clause	Section 11(5) compliance	Section 13	Critical
Dissolution clause	Asset continuity	115TD mitigation	No return to founders
Trustee restriction clause	Related-party safeguards	Section 13	Arm’s-length basis
Amendment clause	Registration continuity	Future compliance	Restrict arbitrary changes
Irrevocability clause	Institutional stability	Stronger defence	Strongly advisable

Formation Documentation Checklist

Category	Documents Required	Mandatory / Conditional
Trust deed	Executed deed	Mandatory
Settlor KYC	PAN/Aadhaar/address proof	Mandatory
Trustee KYC	PAN/Aadhaar/photos	Mandatory
Witness proof	Identity/address proof	Mandatory in many states
Office proof	Utility bill/rent deed/NOC	Mandatory
Property papers	Title documents	Conditional
Trustee resolutions	Governance records	Strongly advisable

Registration Timeline Matrix

Stage	Authority	Process	Indicative Timeline
Stamp duty & execution	State authority	Deed execution	1–3 days
Trust registration	Sub-Registrar	Registration of deed	2–10 days
PAN allotment	Income-tax Department	PAN application	3–10 days
Bank account opening	Scheduled bank	Institutional KYC	2–7 days
12AB processing	CIT(E)/PCIT	Form 10A/10AB	Up to 6 months
80G approval	Income-tax Department	Linked processing	Parallel/combined

PHASE III — TAX ACTIVATION & REGISTRATION

Registration Forms Framework (FY 2026–27)

Form	Purpose	Applicability
Form 10A	Fresh/provisional registration	New trusts
Form 10AB	Regular registration/renewal/modification	Existing trusts
Form 10B	Audit report	Specified cases
Form 10BB	Audit report	Certain institutions
Form 10	Accumulation under Section 11(2)	Income accumulation
Form 9A	Deemed application option	Income timing mismatch
Form 10BD	Donation statement	80G reporting
Form 10BE	Donor certificate	Donor deduction
ITR-7	Income-tax return	Annual filing

Correct Form Selection Matrix

Situation	Applicable Form	Timeline	Critical Point
New trust/no activities	Form 10A	Immediately after formation	Provisional registration
Activities commenced	Form 10AB	Within prescribed timeline	Activity evidence required
Renewal	Form 10AB	At least 6 months before expiry	Delay may lapse registration
Modification of objects	Form 10AB	Within 30 days	Mandatory trigger

Rule 17A Documentation Matrix

Segment	Documents Required	Common Defect
Constitution	Trust deed/registration certificate	Incomplete scan
PAN records	PAN copy	Name mismatch
Trustee records	PAN/Aadhaar/address proof	Missing KYC
Office proof	Utility bill/NOC	Expired proof
Banking proof	Cancelled cheque/passbook	Wrong account details
Activity note	Welfare activity report	Generic drafting
Financial records	Accounts/bank statements	Unreconciled entries
Governance documents	Resolutions/authorisations	Invalid signatory

Priority Sequence to Avoid Rejection or Delay

Priority	Activity	Practical Purpose
1	Deed vetting	Prevent future objections
2	PAN consistency check	Avoid portal mismatch
3	Trustee KYC verification	Prevent defects
4	Office proof validation	Common rejection area
5	Bank activation	Donation readiness
6	Activity note drafting	Genuineness support
7	Upload verification	Avoid defective filing
8	ARN preservation	Tracking & response
9	Notice monitoring	Timely compliance
10	Compliance calendar	Long-term governance

PHASE IV — PUBLIC DONATIONS & FUND GOVERNANCE

Public Donations — Fiduciary Responsibility

Once public donations commence:

the institution becomes a public accountability entity.

Every rupee received:

• must be traceable,
• properly accounted,
• lawfully utilised,
• and capable of audit verification.

Donation Source Matrix

Source	Permissible	Additional Compliance	Risk Area
Founders	Yes	Related-party disclosure	Section 13 scrutiny
Trustees	Yes	Governance transparency	Benefit monitoring
Public donors	Yes	Receipt & donor records	Anonymous donation risk
Volunteers	Yes	Campaign reconciliation	Cash handling risk
Corporates	Yes	CSR documentation	Utilisation reporting
NGOs	Yes	Grant agreements	Layered funding scrutiny
Foreign donors	Subject to FCRA	FCRA approval mandatory	FEMA/FCRA exposure

Donation Acceptance SOP

Compliance Area	Requirement	Critical Caution
Donation receipts	Serially numbered	Mandatory audit trail
Donor identity	PAN/address/mobile/email	Section 115BBC exposure
Banking channels	Strongly advisable	Avoid informal cash receipts
Corpus donations	Written donor direction	Otherwise general donation
Donation register	Digital + physical	Reconciliation essential
Segregation of funds	Corpus/general/project-wise	Utilisation tracking

High-Risk Donation Areas

Risk Area	Consequence
Anonymous donations	Section 115BBC taxation
Accommodation entries	Registration cancellation exposure
Cash-heavy collections	Source scrutiny
Founder-linked routing	Section 13 investigation
Improper utilisation	Litigation & cancellation risk

PHASE V — UTILISATION OF PUBLIC MONEY

Core Welfare Utilisation Principle

Public money:

must move from donation to documented public benefit.

Every expenditure should:

• align with charitable objects,
• have supporting evidence,
• receive internal approval,
• and withstand audit scrutiny.

Welfare Utilisation Matrix

Welfare Area	Documentation Required	Audit Evidence
Educational aid	Student records	Fee receipts
Medical relief	Medical documents	Bills & beneficiary proof
Food distribution	Beneficiary sheets	Distribution evidence
Skill development	Attendance/program records	Certificates/reports
Women welfare	Beneficiary register	Utilisation records
Rural welfare	Project reports	Field documentation

Fund Utilisation SOP

Area	Mandatory Control	Key Risk
Expense approvals	Resolution/authorisation	Unauthorised spending
Budget monitoring	Budget vs actual review	Excessive admin expenses
Vendor verification	Independent review	Related-party exposure
Banking controls	Dual authorisation preferable	Misappropriation
Supporting vouchers	Mandatory	Audit qualification
Welfare linkage verification	Object mapping	Non-charitable application

Administrative Expense Governance

Expense Type	Position	Professional Caution
Genuine salaries	Permissible	Must be reasonable
Rent & utilities	Permissible	Object linkage required
Welfare travel	Permissible	Evidence required
Founder luxury expenditure	Not permissible	Serious violation
Personal benefits	Prohibited	Section 13 exposure
Excessive trustee remuneration	High-risk	Benchmarking advisable

PHASE VI — STATUTORY COMPLIANCE & REPORTING

Annual Compliance Calendar — FY 2026–27

Compliance	Form	Due Date / Timeline	Practical Note
Registration application	Form 10A	Upon formation	For provisional registration
Regular registration/renewal	Form 10AB	6 months before expiry / within 30 days of object change	Critical timeline
Audit report	Form 10B/10BB	At least 1 month before ITR due date	Mandatory where applicable
Income-tax return	ITR-7	Due date under Section 139(4A)	Timely filing critical
Donation statement	Form 10BD	Generally by 31 May following FY	80G reporting
Donor certificate	Form 10BE	Generally by 31 May following FY	Donor deduction support
Accumulation filing	Form 10	Before ITR due date	Section 11(2)
Deemed application option	Form 9A	Before ITR due date	Timing relief

85% Application Rule — Monitoring Framework

Particulars	Compliance Requirement	Monitoring Strategy
Minimum utilisation	85% application	Quarterly review
Shortfall management	Form 9A/Form 10	Advance planning
Investments	Section 11(5) modes only	Monthly review
Welfare deployment	Object-linked spending	Program mapping

Internal Governance & Public Accountability SOP

Governance Area	Best Practice	Objective
Trustee meetings	Quarterly minutes	Transparency
Internal audit	Quarterly review	Risk mitigation
Donation reconciliation	Monthly	Reporting accuracy
Utilisation verification	Project-wise review	Public trust
Investment review	Monthly	Section 11(5) compliance
Legal review	Annual	Registration continuity

Section 13 — Most Critical Risk Matrix

Violation	Example	Consequence
Benefit to specified persons	Founder enrichment	Exemption denial
Non-11(5) investments	Speculative deployment	Tax exposure
Personal use of trust assets	Private usage	Serious scrutiny
Diversion of donations	Non-object expenditure	Cancellation risk
Excessive related-party transactions	Founder-linked vendors	Section 13 trigger

Top Reasons for Rejection or Cancellation

Default Area	Immediate Exposure	Long-Term Consequence
Weak object clause	Registration objection	Litigation
No activity evidence	Genuineness challenge	Rejection risk
PAN/deed mismatch	Defective filing	Processing delay
Poor donor records	115BBC exposure	Penal taxation
Commercialisation	GPU challenge	Exemption denial
Excessive founder control	Governance concern	Cancellation exposure
Weak accounting system	Audit issues	Credibility loss
Delayed filings	Compliance default	Registration lapse
Non-11(5) investments	Section 13 violation	Tax exposure
Weak utilisation evidence	Public accountability concern	Adverse scrutiny

Ultimate Governance & Compliance Framework

Structural Integrity	Financial Integrity	Governance Integrity	Welfare Integrity
Proper deed drafting	Transparent accounting	Trustee discipline	Genuine public benefit
Section 2(15) alignment	Banking traceability	Resolution-based approvals	Beneficiary documentation
Section 11(5) compliance	Donation reconciliation	Related-party safeguards	Welfare evidence
Dissolution safeguards	Audit readiness	Timely statutory filings	Long-term public trust

Final Professional Conclusion

A charitable institution may begin with:

seed funding by founders,

but thereafter evolves into:

a fiduciary public welfare institution accountable to law, donors, beneficiaries, regulators, auditors, and society.

Its sustainability depends not merely upon registration under Sections 12AB or 80G, but upon:

• disciplined governance,
• lawful fund mobilisation,
• transparent accounting,
• documented charitable utilisation,
• continuous statutory compliance,
• strong internal controls,
• and complete avoidance of private benefit or Section 13 violations.

An institution with:

• proper constitutional drafting,
• compliant registrations,
• transparent donation systems,
• disciplined fund utilisation,
• robust donor accountability,
• timely filings,
• and continuous audit readiness,

is best positioned to:

• sustain tax exemptions,
• attract institutional and public donations,
• withstand regulatory scrutiny,
• preserve public trust,
• and create durable lawful social welfare impact in India.

Buying Property from an NRI in India FY 2026–27: Complete Tax, TDS & DTAA Guide

By CA Surekha Ahuja

FY 2026–27 brings major procedural and compliance changes for buyers purchasing property from NRIs in India, including PAN-based TDS simplification from 1 October 2026 and revised compliance forms under the Income Tax Act, 2025.

This guide explains the complete tax, TDS, DTAA, repatriation and compliance framework applicable to property purchases from NRI sellers in India during FY 2026–27.

Key Change in FY 2026–27

1 April 2026 – 30 September 2026

• Buyer generally required to obtain TAN
• TDS governed by Section 393(2)(a)

From 1 October 2026

• PAN-based simplified TDS mechanism introduced
• No TAN requirement in eligible cases
• Section 393(2)(b)

Old vs New Section Mapping

Income Tax Act, 1961	Income Tax Act, 2025	Purpose
Section 194-IA	Section 394	Resident property TDS
Section 195	Section 393(2)	TDS on payments to NRIs
Section 195(8A)	Section 393(2)(b)	PAN-based simplified TDS
Section 206AA	Section 402	Higher TDS for no PAN
Section 197	Section 395	Lower/nil deduction certificate
Form 13	Form 128	Lower/nil TDS application
Form 15CA	Form 145	Foreign remittance declaration
Form 15CB	Form 146	CA remittance certificate
Form 26AS	Form 168	Tax credit statement
Form 16A	Form 131	TDS certificate
Form 27Q	Form 144	NRI TDS return
Section 54	Section 123	Residential reinvestment exemption
Section 54F	Section 124	LTCG reinvestment into residential house
Section 54EC	Section 125	Investment in specified bonds

Correct Tax, TDS & Surcharge Rates – FY 2026–27

Category	Final Tax Rate	Practical TDS Rate*
LTCG (holding ≥24 months)	12.5% + surcharge + 4% cess	12.5% + surcharge + 4% cess
STCG (holding <24 months)	Slab rates	Generally 30% + surcharge + 4% cess

*Subject to lower/nil deduction certificate under Section 395.

Correct Surcharge Position for Property LTCG

LTCG Taxable Under Section 112

Total Income	Applicable Surcharge
₹50 lakh – ₹1 crore	10%
₹1 crore – ₹2 crore	15%
Above ₹2 crore	15% cap continues

Cess: 4% on tax plus surcharge.

Enhanced surcharge rates of 25% and 37% do not apply to LTCG taxable under Section 112. Effective surcharge on such gains remains capped at 15%.

Most Important Rule

In NRI property transactions, TDS is generally deducted on the full sale consideration unless the seller obtains a lower deduction certificate.

Although tax is legally deductible on the sum chargeable to tax, buyers commonly deduct on gross consideration to avoid exposure and litigation risk.

Essential Due Diligence Before Purchase

Before payment or registration, verify:

• Encumbrance Certificate
• Complete title chain
• Mutation records
• Seller PAN
• Passport / OCI / PIO documents
• Tax Residency Certificate (TRC)
• Form 10F in DTAA cases

Maintain:

• Agreements
• TDS records
• Bank trail
• Capital gains computation
• Registration documents

for at least 7 years.

Most Important Tax Planning Tool

Section 395 – Form 128

Lower/Nil TDS Certificate.

Why It Matters

Without Form 128:

• TDS may substantially exceed actual capital gains liability
• Seller refund may remain blocked for months

With Form 128:

• TDS aligns closer to actual taxable gains
• Significant cash-flow relief possible

Best Practice

Apply 45–60 days before registration.

TDS Compliance – Before 1 October 2026

Buyer generally must:

• Obtain TAN through Form 49B
• Deposit TDS through ITNS 281
• File TDS return in Form 144
• Issue TDS certificate in Form 131

TDS Compliance – From 1 October 2026

Simplified PAN-based process expected:

• No TAN requirement in eligible cases
• PAN-based compliance
• Challan-cum-statement mechanism
• Simplified certificate generation

Capital Gains Exemptions – FY 2026–27

New Section	Earlier Section	Benefit	Limit
Section 123	Section 54	Residential reinvestment	₹10 crore
Section 124	Section 54F	LTCG reinvestment into residential house	₹10 crore
Section 125	Section 54EC	NHAI / REC bonds	₹50 lakh

DTAA Position – No Direct TDS Relief

India generally retains taxation rights over immovable property situated in India.

Therefore:

• TDS continues to apply in India
• DTAA usually provides foreign tax credit relief later in country of residence

Repatriation Rules

NRI sellers may generally repatriate:

Up to USD 1 million per financial year

subject to:

• Payment of taxes
• FEMA compliance
• Form 145 / Form 146 compliance
• Banking documentation

Key Compliance Risks

Issue	Consequence
Delay in TDS deduction	Interest liability
Delay in TDS deposit	Interest + penalty
Short deduction	Buyer may be treated as assessee in default
No/invalid PAN	Higher TDS exposure
Incorrect filings	Penalty exposure

Interest under Section 401(1A):

• 1% per month for non-deduction
• 1.5% per month for delayed deposit

Final Takeaways

• PAN verification should happen first
• Form 128 is the single most important tax planning tool
• Post-1 October 2026 transactions are procedurally simpler
• LTCG surcharge on property gains is effectively capped at 15%
• DTAA does not remove Indian TDS
• Maintain complete tax and TDS documentation
• High-value transactions should always be CA-reviewed before payment

Final Practical Strategy

Form 128 filed early + PAN verified upfront + post-1 October 2026 execution (where feasible) = the most efficient structure for buying property from an NRI in India during FY 2026–27.