TDS ON WHICH AMOUNT, UNDER WHICH SECTION

This query is : Resolved

Gaurav Garg (Querist)
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28 March 2009 I (X Ltd.) have received an Invoice from an "interior decorator" which includes "vat" on full amount and he has not charged any service tax on it as his turnover is less than Rs.10 Lacs.
It has charged at an excess rate and hence I need to debit Rs. 5000 to him.

Now my query is that -

I) whether I should deduct TDS ?

II) If yes, under section 194C or U/S 194J as Interior Decorator is a professional.

III) Further, on GRoss Invoice amount or on the amount arrived after adjusting Debit Note.( Invoice and Dr. Note accounted on same date, say 20.03.09)?

IV)Suppose Invoice dated 15.03.09 is booked on 20.03.09 but debit note of Rs. 5000 is raised on 03.04.09

Remember TDS is to be deducted at the time of payment or credit, whichever is earlier.

Please give an elaborate answer.
I shall be very thankful.

Rajesh Kumar

Rajesh Kumar (Expert)
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28 March 2009 Although the service provider is a professional, the deduction in this case will be under Section 194C, because you have contracted a work for him, consisting of his services, goods, fitings etc.
If you take services of an interior decorator only, like designing etc., 194J will be applicable.
TDS is to be deduted on the amount which you pay for contract. Payment of taxes like VAT, Service Tax etc. is not a payment for contract, hence TDS is not required to be deducted on this amount. If the invoice doesnot show any tax separately, deduction is to me made on full amount.
TDS needs to be deducted on the date you booked the expenses.