Income tax on installation chgs of internet.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 October 2012 Respected Experts,

Please help me.

Recently, our office took lease line connection from Sify Technologies Ltd & received installation charges bill.

Please tell us TDS is required to be deducted on INstallation or not.

Also tell us do we have to deduct TDS on Annual recurring charges only. Also tell us the percentage of TDS.

CA Pooja Agarwal

CA Pooja Agarwal (Expert)
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29 October 2012 i think 10% TDS shall be deducted u/d 194J..however it is not applicable for HUF and individuals

Querist : Anonymous

Querist : Anonymous (Querist)

29 October 2012 Thanks for your reply!

But a senior person was telling us to deduct 2 % TDS & treat it as Contract Services.

Query :

Recently, our office took lease line connection from Sify Technologies Ltd & received installation charges bill.

Please tell us TDS is required to be deducted on INstallation or not.

Also tell us do we have to deduct TDS on Annual recurring charges only. Also tell us the percentage of TDS.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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31 July 2024 When dealing with Tax Deducted at Source (TDS) on payments related to lease line connections and installation charges, it's important to understand the nature of the payments and the relevant sections under the Income Tax Act. Here’s a detailed explanation:

### **1. TDS on Installation Charges**

**Nature of Payment:**
- Installation charges for setting up lease line connections are considered as payment for services.

**Relevant TDS Provisions:**
- **Section 194C**: This section applies to payments made for contract work, including installation work. If the installation charges are for a contract of work, then TDS should be deducted under this section.

**TDS Rate:**
- **For Section 194C**: The TDS rate is 1% for individuals and Hindu Undivided Families (HUF), and 2% for other entities (like companies and firms).

### **2. TDS on Recurring Charges**

**Nature of Payment:**
- Annual recurring charges are payments for ongoing services, which fall under the category of payments for professional or technical services.

**Relevant TDS Provisions:**
- **Section 194J**: This section applies to payments for professional or technical services, including recurring service charges.

**TDS Rate:**
- **For Section 194J**: The TDS rate is 10% for professional or technical services.

### **3. Applicability and Action Steps**

**Installation Charges:**
- If the installation charges are considered a part of contract work, you need to deduct TDS under Section 194C at 2% (for other entities).
- Ensure that the charges are properly categorized to determine the correct section.

**Annual Recurring Charges:**
- For annual recurring charges, you need to deduct TDS under Section 194J at 10% if the payment qualifies as professional or technical services.

**Action Steps:**
1. **Review the Invoice:**
- Check if the installation charges are billed as a part of a contract or professional service.

2. **Determine the Section:**
- Apply Section 194C for installation charges if categorized as contract work.
- Apply Section 194J for recurring service charges.

3. **Deduct TDS:**
- For installation charges under Section 194C, deduct TDS at 2%.
- For annual recurring charges under Section 194J, deduct TDS at 10%.

4. **Submit TDS Return:**
- Ensure timely filing of TDS returns and issuance of TDS certificates.

### **Summary**

- **Installation Charges:** TDS under Section 194C at 2% (for non-individuals).
- **Annual Recurring Charges:** TDS under Section 194J at 10% (for professional or technical services).

Ensure to classify the payments correctly and apply the appropriate TDS provisions. If in doubt, consulting a tax professional is advisable to ensure compliance with the tax regulations.