TDS
This query is : Resolved
20 July 2010
What will be the rate of TDS in case of Proprietorship firm under section 194C
20 July 2010
dividual or HUF need not deduct tax if the contract is exclusively for personal purposes.
Income Tax should be deducted at the time of payment or credit to the account of the contractor whichever is earlier.
Income Tax is to be deducted at source @ 1% if the contractor/sub contractor payee is an individual or HUF. Payment of amounts to persons other than Individual/HUF would attract TDS rate of 2%.
Provisions of Section 194C are applicable only where the contract is either a “contract for carrying out any work” or a “contract for supply of labour for works contract”. Hence, these provisions are not applicable for payments made under the contract of sale of goods.
For the purpose of this section, the following contracts are also included in the scope of “Work”:
1. Advertising.
2. Broadcasting and telecasting including production of programs for broadcasting and telecasting.
3. Carriage of goods and passengers by any mode of transport other than Railways.
4. Catering.
No deduction of tax at source shall be made under this section in the following circumstances:
1. If the amount paid/payable or credited/likely to be credited to the contractor/sub-contractor does not exceed Rs.30,000/- in a single instance (Applicable from 1.7.2010. previously it was Rs.20,000). However, the total of amounts paid or credited during the financial year should not exceed Rs.75,000/-. If the said amount exceeds Rs.75,000/-, then, the liability for payment arises on the whole of amount paid or credited and not on the amount in excess of Rs.75,000/-.( The limit of Rs.75,000 is applicable from 1.7.2010. Previously it was Rs.50,000)
2. In the case of a sub-contractor who is a resident individual and who owns not more than two goods carriages during the previous year, no tax shall be deducted at source during the course of business of plying, hiring or leasing goods carriages if he provides a declaration to the person responsible for payment to that effect in the prescribed form. [Form 15-I]
Income Tax is to be deducted on the amount of payment/credit and not on the income part of the amount.
In a case where advance payments are made in pursuance of contract to be adjusted against work to be done, tax has to be deducted at the time of the advance payments.
The provisions of Sec 194C does not apply to payments made to Airlines or travel agents for the purpose of travel of individuals even though the payment/credit is made by the specified persons. But, if the aircraft is chartered for carriage of passengers or goods, this section shall be applicable. [Circular No.713 dt.2-8-1995 and No.715 dt.8-8-1995]
In the case of advertising contracts, tax needs to be deducted only when the client makes payment to the advertising agency and not when the advertising agency makes payment to the media (includes both print and electronic media). [Circular No.715 dt.8-8-1995]
If there is a consolidated bill given by advertising agencies which may include artwork charges etc apart from advertising charges, the rate applicable is 1% on the whole. Tax is to be deducted on the gross amount of the bill (including the portion of media bill) and not on the commission of the advertising agency. But, payments made to Doordarshan (Now Prasar Bharati) are not subject to TDS since it is a government agency and hence, not liable to income tax. [Circular No.715 dt.8-8-1995].
Income Tax should be deducted at the time of payment or credit to the account of the contractor whichever is earlier.
Income Tax is to be deducted at source @ 1% if the contractor/sub contractor payee is an individual or HUF. Payment of amounts to persons other than Individual/HUF would attract TDS rate of 2%.
Provisions of Section 194C are applicable only where the contract is either a “contract for carrying out any work” or a “contract for supply of labour for works contract”. Hence, these provisions are not applicable for payments made under the contract of sale of goods.
For the purpose of this section, the following contracts are also included in the scope of “Work”:
1. Advertising.
2. Broadcasting and telecasting including production of programs for broadcasting and telecasting.
3. Carriage of goods and passengers by any mode of transport other than Railways.
4. Catering.
No deduction of tax at source shall be made under this section in the following circumstances:
1. If the amount paid/payable or credited/likely to be credited to the contractor/sub-contractor does not exceed Rs.30,000/- in a single instance (Applicable from 1.7.2010. previously it was Rs.20,000). However, the total of amounts paid or credited during the financial year should not exceed Rs.75,000/-. If the said amount exceeds Rs.75,000/-, then, the liability for payment arises on the whole of amount paid or credited and not on the amount in excess of Rs.75,000/-.( The limit of Rs.75,000 is applicable from 1.7.2010. Previously it was Rs.50,000)
2. In the case of a sub-contractor who is a resident individual and who owns not more than two goods carriages during the previous year, no tax shall be deducted at source during the course of business of plying, hiring or leasing goods carriages if he provides a declaration to the person responsible for payment to that effect in the prescribed form. [Form 15-I]
Income Tax is to be deducted on the amount of payment/credit and not on the income part of the amount.
In a case where advance payments are made in pursuance of contract to be adjusted against work to be done, tax has to be deducted at the time of the advance payments.
The provisions of Sec 194C does not apply to payments made to Airlines or travel agents for the purpose of travel of individuals even though the payment/credit is made by the specified persons. But, if the aircraft is chartered for carriage of passengers or goods, this section shall be applicable. [Circular No.713 dt.2-8-1995 and No.715 dt.8-8-1995]
In the case of advertising contracts, tax needs to be deducted only when the client makes payment to the advertising agency and not when the advertising agency makes payment to the media (includes both print and electronic media). [Circular No.715 dt.8-8-1995]
If there is a consolidated bill given by advertising agencies which may include artwork charges etc apart from advertising charges, the rate applicable is 1% on the whole. Tax is to be deducted on the gross amount of the bill (including the portion of media bill) and not on the commission of the advertising agency. But, payments made to Doordarshan (Now Prasar Bharati) are not subject to TDS since it is a government agency and hence, not liable to income tax. [Circular No.715 dt.8-8-1995].
20 July 2010
If a company makes payment to a proprietory firm for a contract then what will be the rate of TDS u/s 194c
20 July 2010
1 %
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