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TDS - Contractors

10 May 2007

Hi,

We have a security contract for which we will pay Rs. 10,469/- p.m. (Rs. 9,500 + 10.2% service tax). Now, I am confused to deduct TDS @ 2.091% (u/s 194C). The TDS on which amount to deduct? on Rs. 10,469/-? or Rs. 9,500/-?

My question is should I include Service Tax in the TDS calculation or not?

Please advice.

Best Regards
Narasimha Rao

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42 Replies

Cseetharam (CA Job) (15 Points)
Replied 10 May 2007

Hello,
TDS has to be deducted on 9,500/-. Service tax should not be included for deducting TDS.

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Amit Aggarwal (24 Points)
Replied 10 May 2007

First of all, TDS rate should be either 2.04% or 2.244% and not 2.091%.

Secondly, it should be deducted on the gross amount of the bill including service tax i.e.Rs.10469/=.

Satish Kapoor (14 Points)
Replied 10 May 2007

TDS has to be deducted on the full amount of the bill.

Narasimha Rao (53 Points)
Replied 10 May 2007

Mr. Amit, you are saying "TDS rate should be either 2.04% or 2.244% and not 2.091%."

How it come, TDS for a company should be 2% + Surcharge 2.5% + EC 2%, total comes to 2.091%.

Please expidite.

Nitesh Katariya (13 Points)
Replied 10 May 2007

Mr. Narasimha Rao Surcharge rate for a company is 10% instead of 2.5%. Rate of surcharge 2.5% is for foreign companies. So 2.244% is right.

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Ankit Bhatia (163 Points)
Replied 10 May 2007

As per circular 715 ,TDS has to be deducted on gross amt of bill,hence service tax cant be excluded.

Paresh Bhagwat (46 Points)
Replied 10 May 2007

I am agree with Amit Agarwal

Ankit Bhatia (163 Points)
Replied 10 May 2007

As per circular 715 ,TDS has to be deducted on gross amt of bill,hence service tax cant be excluded.

Biyani Sir (441 Points)
Replied 12 May 2007

The position is not quite clear. In its circular, the CBDT has stated that tax has to be deducted on gross amount. In any case, it would be a safer exercise to deduct tax on gross amount including service-tax.

Vk Duggal (320 Points)
Replied 18 May 2007

In section 194C(1) it is clearly stated that TDS is to be deducted on "any sum" paid. Any sum has not been defined in the IT Act. The payment to party is made of the gross amount including service tax, hence TDS should be deducted on gross amount including service tax

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Raj Kr.Goyal (CA) (58 Points)
Replied 18 May 2007

As per section 194c tds is to be deducted on gross amount of bill .hence tds should be deducted on gross amount of bill including service tax. the rate of tds is 2.266 % i.e 2 % + 10 %surcharge of tax +3 % Education cess of tax& surcharge. if contractor is indvidual then tds rate 2.06 .( if gross income less than Rs.10 lacs)