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TDS on Labour Supply

09 July 2008

In Case of Construction Company, from the point of view of contractor: what should be the rate of TDS on Labour Supply? I have seen deduction @ 1% treated as sub-contract while I am on audit but in my opinion it will be deducted @ 2% as it differs from sub-contract as we can use the labour according to our will? However 2% TDS is justified if labour contract is in the nature of a specific assignment such as construction of a specified wall. Please suggest the suitable answer of my question.

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5 Replies

CA Thomas Raju Paravada (Chartered Accountant) (570 Points)
Replied 09 July 2008

Hai Vineet,

A sub contractor is a person who carries on the work of a contractor including supply of labour. So its not the specific assignment that should be taken into account for the purpose of TDS.

So tds is deducted @ 1% for Sub contractors.

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Mohit Rajvanshi (Job) (25 Points)
Replied 09 July 2008

i m hvng sum prob. in nderstng ur Q. i mean to whom u r saying a contractor -- 1 ) Company - 2 ) Contractor-->> 3 ) subcontractor.

CA Vineet Goel (CA) (118 Points)
Replied 15 July 2008

Originally posted by :Thomas
"	Hai Vineet, A sub contractor is a person who carries on the work of a contractor including supply of labour. So its not the specific assignment that should be taken into account for the purpose of TDS. So tds is deducted @ 1% for Sub contractors.	"

Thank for the reply. But my Question is different. My orgument is that whether the labour supply in that case was in the nature of sub-contractor or contractoror. Labour supply must be in the nature of sub-contractor but only when it takes place for the purpose of completing the main contract. If we take the labour supply which can be used as per our will then the case may be different. What do u think? tell me.