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Am I still liable to deduct TDS

Ruchi Agrawal (law) (129 Points)

16 June 2010

I am an individual not liable to audit us 44AB for my publishing sole proprietorship. Am I still liable to deduct TDS for bills paid exceeding Rs. 30,000.

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3 Replies

Amir (Learner) (4016 Points)
Replied 17 June 2010

Dear Sir,

Sole Properietory Firms are not required to deduct TDS in the current FY, if they were not liable to get the Tax Audit done in the immediately preceding year.

But the above principle does not apply if payments are made to

1) Residents u/s 194C as contract payments- in such case TDS is required to be deducted even if Tax audit was not required in the preceding year, provided the payment is made for services used in the business / profession.

2) Non-resident i:e in that case TDS is required to be deducted even if Tax audit was not required in the preceding year. In this case whether or not services are used in business/professsion.

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Venkateswara Rao Sapare (Accountant) (1500 Points)
Replied 19 June 2010

“I am an individual not liable to audit us 44AB for my publishing sole proprietorship”, the words of Mr.Karunesh Agarwal triggers us to refresh ourselves following provisions of Section 194C, “ Specified Person – Meaning of – Tax is deductible under section 194C(1) only if payment is made in pursuance of a contract between a specified person and the resident contractor. Following one is one among the “Specified persons” for this purpose: An individual whose books of account are required to be audited under section 44AB(a)/(b) during the immediately preceding financial year .” In the present question, the assessee is not required to be audited. May I reqest Mr.Amir, to let me understand how is it so in your following words: “1) Residents u/s 194C as contract payments- in such case TDS is required to be deducted even if Tax audit was not required in the preceding year, provided the payment is made for services used in the business / profession. 2) Non-resident i:e in that case TDS is required to be deducted even if Tax audit was not required in the preceding year. In this case whether or not services are used in business/professsion.”

Amir (Learner) (4016 Points)
Replied 20 June 2010

Dear Venkat Sir,

You are rite but that was the position prior to amendment in Sec 194C on 01.10.2009.

After the said amendment - Sec 194C(1)

Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) 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 at 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—

(i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;

(ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family,

194C(4)-

No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.