Section 194C – Must know about TDS on payment to contractors
Table of Contents
What is Section 194C – TDS on payment to contractors or sub-contractors
Section 194C – TDS on Contractor contains a provision related to the deduction of tax at source (‘TDS’) on payment to Contractors or Sub-Contractors.
Table of Contents
- Who is responsible for tax deduction u/s 194C ?
- TDS rate u/s 194C ?
- Meaning of work u/s 194C ?
- Meaning of term Sub-Contractor u/s 194C ?
- When no tax is deductible u/s 194C ?
- Time limit for depositing TDS u/s 194C
- Time of tax deduction u/s 194C
- When no tax is deductible u/s 194C ?
- FAQs on Section 194C – TDS on Contractor
Who is responsible for tax deduction u/s 194C ?
194C of Income tax states that any person responsible for paying to contractor or sub-contractor for carrying out any work (including supply of labour for carrying out work) in pursuance of a contract between a specified person and the resident contractor
‘Specified persons’ as per section 194C includes any of the followings:
- Company
- Firm / LLP
- Individual or HUF if the amount paid or credited is not exclusively for personal purposes of individuals or HUF
- Trust
- AOP/BOI whose books of accounts are required to be audited under section 44AB (a) or (b) immediately preceding preceeding financial year
- Local Authority
- Central Government
- State Government
- Corporation established by or under a Central, State or Provincial Act
- Co-operative society
- authority constituted in India or under any other law
- society registered under the Societies Registration Act
- University
- foreign Government or a foreign enterprise or any association or body established outside India
TDS rate u/s 194C ?
The TDS rate under section 194C is as follows:
| Upto 13/05/2020 | From 14/05/2020 To 31/03/2021 | |
| If the recipient is an Individual / HUF | 1.00% | 0.75% |
| If the recipient is any other person | 2.00% | 1.50% |
What is TDS rate if PAN not available ?
If the recipient does not furnish his PAN to the deductor, TDS will be deducted at the rate of 20%.
Whether surcharge, education cess to be added in TDS rate ?
Surcharge or health and education cess is not to considered in TDS rate.
Meaning of work u/s 194C ?
The term ‘work’ for the purpose of section 194C includes
- Advertising
- Broadcasting and telecasting
- Catering Services
- Carriage of goods or passengers (excluding railways)
- Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer or its associates.
Associates for the purpose is a person placed similarly in relation to such customer as it the person placed in relation to the assessee under the provisions of section 40A(2)(b).
Meaning of term Sub-Contractor u/s 194C ?
The expression ‘Sub-Contractor’ means
- Contact with the contractor for carrying out work
- Supplying of labour for carrying out work by the contractor
When no tax is deductible u/s 194C ?
No TDS is required to be deducted u/s 194C in the following cases
· Consolidated amount below Rs 1,00,000/-:
Aggregate amount of sum credited or paid does not exceed Rs 1,00,000/-
· Single transaction below Rs 30,000/-:
Single amount credited or paid does not exceed Rs 30,000/-
Time limit for depositing TDS u/s 194C
The time limit for depositing TDS amount to the account of the Government
- Government: The amount needs to be paid on the same day where the payment is made by or on behalf of the Government
- Other than Government:
- Amount paid or credit in March, within next month by 30th April
- Any other case: the amount has to be deposited within the 7th of the next month.
Time of tax deduction u/s 194C
The tax shall be deducted u/s 194C, being earlier of the followings:
- at the time of payment;
- at the time of credit of such income to the account of the payee
Lower / Nil deduction of TDS on Fees for professional or technical services under section 197
The recipient of Income can apply in Form No 13 to the Assessing Officer to get a certificate authorizing the payer to deduct tax at lower or deduct no tax as may be appropriate.
FAQs on Section 194C – TDS on Contractor
Is TDS rate is different for contractor and sub-contractor?
No, TDS rate is same for both contractor and sub-contractor in order to reduce disputes and litigation between taxpayer and tax department.
Is TDS applicable on personal purposes?
Payment by Individual or HUF to a resident contractor for personal purposes is not subject to tax deduction.
Also read:
- Income Tax Slab for FY 2021-22
- Depreciation Income Tax
- Depreciation Companies Act
- SECTION 192 – TDS on Salary
- 194I – TDS on Rent
- 194IA – TDS on Sale or Purchase of Property
- 194IB – TDS on Rent 50K
