Contractor

Section 194C : Payment To Contractor And Sub-Contractor

1.         Who is require deduct Tax at source ( Tax Deductor) :        Any person responsible for paying any sum to any resident contractor for carrying out any work (including supply of labor for carrying out any work) in pursuance of a contract between the contractor and following specified person.

Meaning of Specified Person

1. The Central Government or any State Government or any local authority ; or

2. Any PSU or any company or any co-operative society or any society and any trust ; or

3. Any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning ,development or improvement of cities, towns and villages, or for both ; or

4. Any University including a deemed university.

5. Any Firm

Meaning of Work :    

The work shall also include ---

1. Advertising ;

2. Broadcasting and telecasting including production of programmes for such broadcasting or telecasting ;

3. Carriage of goods and passengers by any mode of transport other than by railways ;

4. Catering.

2.   When to deduct tax at source :At the time of payment or at the time of credit, whichever is earlier.

3.   What is the Rate of TDS :         Where a sum is payable to a resident contractor for –

1. 1% where payment/credit is to an individual/HUF

2. 2 % where recipient is any other person

# No cess and surcharge on Basic TDS rates given above on payment made to Residents .

TDS without PAN : If Pan has not been provided by the deductee, then TDS must be deducted @ 20% u/s 206AA

4.   When Tax is not required to be deducted at source :      (Cut off amount) :If the credit or the payment in pursuance of the contract does not exceed Rs.30,000/-, no deduction has to be made at source. However , if the aggregate of all amounts paid/credited or likely to be paid/credited exceeds Rs. 75,000/- then tax at source is to be deducted.

5.         Due date of Deposit: Before 7th of Next month , However if deposit by Book Adjustment by Govtdepartment then on same day.Tax deducted in the Month of March due date is April 30th.

6.         Exemption -

• Individual /HUF personal Purpose :No TDS to be done by an Individual or an HUF on a contractual payment of work which is for personal purposes of the individual or the HUF .

• No TDS on Transporter :No deduction is to be made for sum credited/paid to a contractor during the course of business of plying/hiring/leasing of good/carriages on furnishing Pan to the payer/ deductor .

7.         No TDS by Individual /HUF in First year of Operation of business in any case:A sole proprietor or anindividual is supposed to deduct tax under sections 194A, 194C and 194J if his books of account are required to be audited under section 44AB in the immediately preceding financial year. 

So no TDS is required to be deducted in First year of Business by Individual /HUF as there is no preceding year and books of account are not required to be audited under section 44AB in immediately preceding year.