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CA. Abhishek K. Pandey (Manager (Advance)) (901 Points)
Replied 19 May 2012

Originally posted by : Faiz Ahmed
	X & Co. (Firm) engaged in wholesale business assigned a contract for construction of its godown building to Mr. Ravi, a contractor. It paid Rs.25,00,000 to Mr. Ravi as Contract Payment. Please tell me which one of the following is correct ? a) As the payment is made to Company then it comes under 194C, payment to contractors other than HUF or Individual and so 2% on the payment will be deducted as TDS. Rs.25,00,000 * 2% = 50,000/- b) The same 2% is applicable along with Education Cess & SHEC ? Rs.25,00,000 * 2.3% = 57,500/- Which one of the above amounts is correct as TDS deduction ? Thanks & Regards !

TDS is deducted on the basis of payee.

Hence, should be deducted @ 1%. Since, payee is individual.

Also, EC & HSEC shouldn't be deducted on TDS. It has to be adjusted by payee in its advance tac & sat.

CA. Abhishek K. Pandey (Manager (Advance)) (901 Points)
Replied 19 May 2012

Originally posted by : Faiz Ahmed
	My friend have still doubt about TDS, so please clarify his question below : I thank you all for your replies...!! And still I have another question, i.e., Suppose if the contractor there is not Mr. Ravi and its M/s LMN (P) Ltd, then the amount of TDS is 2% right ? But in my practical experience I have seen parties deducting 2% plus EC & SHEC also. Please explain me why it is done so when only 2% should be deducted ? LMN (P) Ltd is a Manpower Service Providing company which go contract from a Defense Organisation. And when the Defense paid the Invoice amount every month, it will deduct 2.3% and not 2% to the company (Contractor). Please let me know the reason for deducting EC & SHEC ??? Thanks & Regards..!!