Tuesday, 15 April 2014

TDS FROM PAYMENT TO CONTRACTOR SEC. 194 C






Any person responsible for paying any sum to any resident for carrying out any work including supply of labour for carrying out any work in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or the time of payment thereof in
cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to:-
· 1% where the payment is being made or credit is being given to an individual or a HUF.
· 2% where the payment is being made or credit is being given to other than an individual or a HUF.
Where any sum referred to in sub sec. 1 is credited to any account, whether called suspense account or by any other name, in the books of accounts of the person liable to pay such income, such crediting shall deemed to be credit of such income to the account of the payee and the provision of the sec. shall apply accordingly.
Specified person includes (who is responsible to deduct tax u/s 194c):-
· The central govt. or state govt.
· Any local body
· Any corporation established by or under a CG or state govt.
· Any company
· Any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, developing or improvement of cities, towns, villages or both
· Any society registered under society act 1860
· Any trust
· Any university established or incorporated by or CG or state or provincial act and institution declared to be a university under sec 3 of the university commission act 1956
· Any government of a foreign state or foreign enterprise or any association or body established outside India
· Any firm
· Any person, being an individual or a HUF or AOP or BOI
The specified persons are liable to audit of accounts under clause (a) or (b) of sec 44AB during the FY immediately preceding the FY in which such sum is credited or paid to the account of the contractor.
IMPT note:-
Contract shall include the sub- contract.
Work shall include:-
· Advertisement
· Broadcasting and telecasting
· Carriage of goods or passengers by any mode of transport other than by railways
· Catering
· Manufacturing or supplying a product according to the requirement or specification of a customers by using material purchased from such customer.
Work does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from other than such customer.
Contract of sale shall not be covered under sec 194c. Purchase of advertisement material from a person without supplying any material used in preparation of said material shall be a contract for sale.
Under such circumstances TDS u/s 194c is not deducted:-
· Where single payment does not exceeds Rs. 30000/-
· Where the aggregate payment does not exceeds Rs. 75000/-
· In case where TDS u/s 194C is not deductible, if the transporter provides it’s PAN No.
· In case, where Payee applied in form 13 to AO for non-deduction, being his taxable income including rent below tax limit, and has obtained certificate thereof.
No payment are made to non-resident contractor would come within the preview of this section.
The provision of this sec. shall not apply to franchise agreement as under franchise agreement, their consist a mutual obligations and rights.

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