Divya Garg (Director) (178 Points)
31 January 2014If a contractor is working for you for last six months as a software developer and sends the invoice by end of January with amount 160000 INR. Company then makes payment to him before Feb 7 by deducting TDS 1%.
Is it correct way of deducting TDS. Even though payment is for services redndered for past 6 months but since there is a single invoice by contractor which is sent on 28th Jan, so we are deudcting TDS before Feb 7.
Please confirm.
Thanks,
Divya Devi
Rajiv Limbachiya
(Deputy Manager)
(140 Points)
Replied 31 January 2014
There is two condition for TDS deduction, you have to care two things i.e
1) Single payment should not exceed 30000 or
2) During the financial year total payment sould not exceed 75000.
if any of above condition not fulfil you can dedcut TDS directly from single invoice....
M.Prabhakaran
(Accountant)
(24 Points)
Replied 31 January 2014
KCJM and Associates
(Chartered Accountants Firm)
(864 Points)
Replied 31 January 2014
Dear Ms Divya,
The deductor is liable to deduct the TDS on payment or credits whichever occurs earlier. If you have not made any payment towards the work done before the invoice date, which is Jan 28, the first credit in the account of the software developer would be on Jan 28, which would create your liability to deduct TDS on Jan 28 and in turn to remit the same on or before Feb 7 irrespective of the fact that the work involves past 6 months.
However, in our opinion the case may fall u/s.194J subject to the type of service specified in the contract, if any, if it is software development instead of section 194C which you have suggested.
We hope your query is addressed. You may also click here for further clarification on the issue.
KCJM, Chartered Accountants
https://www.kcjm.in/
Mahesh SivaramaKrishnan
(Forensic Accountant)
(25 Points)
Replied 31 January 2014
Dear Divya
FIrst of all obligation to deduct TDS arises on date of Invoice(or Credit) or payment which ever is earlier.So you should have passed the deduction entry on 28th Jan and payment for the same to be made on or before 7th Feb.
Here,this transaction comes under the provisions of Sec 194J where TDS have to be dedcuted at 10% instead of 1% under sec 194C.
You need to check one more information on nature of work,because webpage develpoment includes selling web page space,sever sale also would have happened,better check once again and then decide on whether it is Sale or Service.
Because many people quickly come to a conclusion that webpage development means service,so TDS attracts... Please check and decide
Regards
Arif Ali
(Apt Co Advisory)
(1230 Points)
Replied 31 January 2014
As per ur question it is seem to liable to deduct the TDS under section 194J @ 10%(depends on type of service received). Since u hv received the invoice 28th Jan then u have to deduct the TDS on that date and u have to pay the TDS amount to Govt till 7th feb. and others are well answered above.
Divya Garg
(Director)
(178 Points)
Replied 03 February 2014
Thank You all for your response.
It seems I have made a mistake in my post. It's actually payment for data entry work and not software development. So, I assume 194C can apply in that case ? please confirm. We have deducted 1% for data entry work.
Thank You.
Divya Devi
CAclubindia
