Introduction-
TDS on payment to contractor under section 194C of Income Tax Act 1961 refers that Any person responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and—
- The Central Government or any State Government; or
- Any local authority; or
- Any corporation established by or under a Central, State or Provincial Act; or
- Any company; or
- Any co-operative society; or
- Any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or
- Any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or
- Any trust; or
- Any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or
- Any firm; or
- Any 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 is credited or paid to the account of the contractor.
Applicability of Section 194C-
The provisions are applicable only to following contracts-
Works Contracts and Labour Contracts
Exception: However, it is not applicable to any contract that deals with the sale or supply of any goods or products.
When TDS should be deducted from Contractor or Sub Contractor-
The person responsible for making payment to resident contractor/sub-contractor should deduct TDS,
- Either at the time of crediting such sum to the account to the payee or
- At the time of payment thereof in cash or by an issue of a cheque or by any other mode.
Whichever is earlier
No TDS will be deducted if –
- The payment/credit during the year to the person carrying on business of plying, hiring or leasing goods carriages, on furnishing of his PAN.
- The payment/credit in pursuance of any contact does not exceed Rs. 30,000.
- The aggregate amount of payment/credit does not exceed Rs. 1, 00,000 during the financial year.
- The amount paid/credited by an Individual or HUF to the contractor exclusively for the personal purpose of such individual or any member of HUF.
- The payment is made to Travel agents or Airlines for purchase of tickets for Air travel.
- The payment is being made by a person who is not required to get his account audited under section 44AB i.e. Tax Audit.
Example 1-
M/s Shyam & company (partnership firm), enter into a contract of Job work with Mr. Ram kumar for Rs. 25,000 during the year 2017-18. Whether the firm is required to deduct TDS under section 194C?
Answer-
M/s Shyam & Company is not required to deduct TDS under 194C because they enters in to a single contact which is not exceeding the amount of Rs. 30,000/-.
Example 2-
M/s Shyam & company (partnership firm) has made Job work from Mr. Ram kumar regularly during the financial year 2017-18 aggregate amount of Rs.1, 10,000. Whether the firm is required to deduct TDS under section 194C?
Answer-
Yes, M/s Shyam & Company is required to deduct TDS under 194C because the aggregate amount exceeds Rs. 1,00,000 during the financial year 2017-18.
TDS should be deducted at the time of credit, whichever is earlier, deduct an amount equal to-
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Particulars
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If Pan is Available up to 13.05.2020
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If Pan is Available w.e.f. 14.05.2020 to 31.03.2021
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If PAN is not Available
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In case of an Individual or HUF
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1%
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0.75%
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20%
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In case of other than Individual or HUF
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2%
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1.5%
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20%
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In case of Transporters
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0%
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0%
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20%
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Example 3-
M/s Shyam & company (partnership firm) has made Job work from Mr. Ram kumar regularly during the financial year 2017-18 aggregate amount of Rs.1, 10,000. What is the rate of TDS which is to be deducted under section 194C?
Answer-
M/s Shyam & Company is required to deduct TDS under 194C @ 1% because Mr. Ram is an Individual, so the amount will be deducted of Rs. 1,100 (i.e. 1% of Rs. 1,10,000).
Example 4-
M/s Shyam & company (partnership firm) has purchased some material and the amount of freight is Rs. 15,000 as per GR. The transporter has submitted the PAN number of the firm. Whether it is required to deduct TDS from the amount of freight?
Answer-
No, M/s Shyam & Company is not required to deduct TDS under 194C because the transporter has submitted PAN number.
TDS which has deducted from the person to be deposited within 7 days from the end of the month in which the deduction is made except for the month of March i.e. 30th April.
Example 5-
M/s Shyam & company (partnership firm) has deducted TDS under section 194C in the month of May 2018. What will be the due date for payment of TDS without Interest and Penalty?
Answer-
Due date for payment of TDS under section 194C is 7th June 2018 for the month of May 2018 without interest and penalty.
The return should be submitted in Form 26Q i.e. Statement of TDS deducted on all payments other than Salaries.
Issuance of TDS certificate-
The person who has deducted TDS from payments under any contact is required to issue TDS Certificate in Form 16A within the time limit prescribed by Income Tax Department.
As per the CBDT Circular No. 1/2012, dated 9th April 2012, generating the TDS certificate through the TIN central system and then downloading the certificate with a unique certificate number from TIN website has been made compulsory for all the deductors. These provisions were made applicable from 1st April 2012. The TDS certificate that has been issued can be further authenticated by using either a digital signature or manual signature.