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TDS deduction in 1st year

Rashmi (Accountant) (140 Points)

05 October 2019

A contractor 1st time crossed 1 cr in June-2019, this will be his 1st audit.

My question is, is he required to deduct TDS for petty contractor payment.

He doesn't have TAN yet,

His business may cross 3cr for 01-04-19 to 31-03-2020

Thank you

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9 Replies

Kapadia Pravin (17259 Points)
Replied 05 October 2019

TDS is required to be deducted under 194C.

Any payment in excess of 30000/- at a time or in excess of 1 lakh during the FY --- TDS is mandatory.

TAN No. is must. Apply immediately.

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sabyasachi mukherjee (27574 Points)
Replied 06 October 2019

Yes rashmi, he is supposed to deduct contractor payment as per Sec 194c .
if the business is a sole propeitor , then 1%.
if it is any other person then 2%.
threshold limit rs.30000 for a single payment.

Kapadia Pravin (17259 Points)
Replied 07 October 2019

In addition to my early reply .....

TDS Rates on Contracts

The rate of TDS applicable on contracts under section 194 C is -----

1% for Residential Individual (Proprietory concern) and HUF.

However, for resident other than individual or HUF are liable to pay 2%.

Payee not possessing PAN card will be liable to pay at the rate of 20%.

1 Like

Rashmi (Accountant) (140 Points)
Replied 07 October 2019

Thank you all, I have some information regarding the same.

The following provisions contain exemptions from TDS deduction for individual or a Hindu undivided family if there accounts were not audited in the previous financial year: 1. Proviso to section 194A(1) reads as under: "Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section." 2. Explanation mentioned in Section 194C defines specified person which includes: " any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person,— (A) does not fall under any of the preceding sub-clauses; and (B) is liable to audit of accounts under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor" 3. Second Proviso to section 194J reads as under: "Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income-tax under this section" 4. Second Proviso to section 194I reads as under: "Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section." 5. Second Proviso to section 194H reads as under" "Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section"

Is this correct?

Kapadia Pravin (17259 Points)
Replied 07 October 2019

@ Rashmi
You asked for TDS payment on contractor and the reply is 194C as above replied.

Whatever your detailed reply is all correct TDS provisions.

Apply for TAN immediately.

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Suresh Thiyagarajan (Student) (3986 Points)
Replied 08 October 2019

1. Yes, once the person crosses the threshold limit of Rs. 1 crore (u/s 44AB for business), TDS needed to be deducted u/s 194C if the payment exceeds the threshold limit of Rs. 30,000 (single payment) or Rs. 1 lakh in aggregate during the year.
2. In your case, if you are liable to deduct TDS then TAN is mandatory. Failing to quote the number will result in a penalty of Rs. 10,000 u/s 272BB.
3. As explained by Mr. Pravin, get TAN ASAP.
Please correct me if the above solution has an alternative view.

Rashmi (Accountant) (140 Points)
Replied 11 October 2019

Thank you sir,

for better understanding I would like to introduce the business process of the person,

A is a contractor, taking contracts from the builder and some time from a big contractor and passing that contract to other petty contractors after keeping his profit.

I.e. A is a contractor

B is a builder '

"B" signed an agreement with 'A" for 1cr to complete shuttering works and some time for some other construction works also,

then A- recruits some unregistered labour contractors to complete the work,

for GST "A" charging GST to B and paying to Govt, but neither petty contractors are charging GST to A nor paying.

As you said TAN is most, yes they have now applied for the TAN.

My question is on which amount they would TDS, as some amount they have already paid to petty contractors between April to Sep-19, and the TAN application done in October-19, should they deduct TDS on entire amount paid till date or only that amount which they paid from October-19.

Your early suggestions are highly appreciated.

Rashmi

Suresh Thiyagarajan (Student) (3986 Points)
Replied 11 October 2019

Easily, TDS needed to be deducted on the entire amount of the contract.

BIBIN P B (Tax practitioner) (99 Points)
Replied 28 April 2021

Asper explanation i(l)(b) to section 194c, for individuals, section 194 c is not applicable unless his turnover exceeds 1 crore during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor.

Hence in your case tds provisions u/s 194c is not applicale for the fy 19-20 (bcz your business turnover not exceeded 1 crore during the fy 18-19 or its a newly commenced one), but it will apply for the fy 20-21.

Please make additions or correction if i am wrom.