TDS for Annual Maintenance Contract

The proper functioning of the office equipments in the company requires proper maintenance and regular services which is out sourced these days to other companies who are specialized for this work. But there should be a contract supporting the whole procedure.

Normally three types of maintenance contracts are found in India:-

1) Preventive Maintenance Contract (PMC)
2) Remedial Maintenance Contract (RMC) for Breakdowns.
3) Annual Maintenance Contract for CNC Controllers. (AMC)
The Annual Maintenance Contract is the legal agreement normally conducted between two companies wherein the later agrees to render the maintenance service annually to the former at an exchange of the nominal amount. It ensures that the later promises to provide maintenance services to the former all through out the year on a regular basis.

The Annual Maintenance Contracts is also known as AMC which is liable to TDS as per the Income Tax Act 1961. It was issued by the Central Board of Direct Taxes (CBDT) on the Circula No 715 and was being published on 8th of August 1995. This issue says that a regular maintenance agreement which involves the need of spares are covered u/s 194C is not tax liable but wherein the technical services are provided is attached with the deduction of tax.

The TDS on the AMC is deducted on the single contract if the amount exceeds Rs 20000/- and in case of multiple contracts the deduction starts after Rs 50000/-.

Following are the services of AMC where the TDS is deducted:

1) Maintenance of computer and peripherals
2) Networking, LAN connection and web designing
3) Plantation and maintenance of Transformer & Panels in the industry
4) Contracts made annually for the inside Electrical fittings.
5) Proper maintenance and servicing for the electrical equipment present in the company.
6) In fact T.D.S. is applicable for on going service rendered for fixing telephone cable and I.O. Box D-Link.