Tds (Income Tax)

This query is : Open

Author : Anonymous

( Author )
15 April 2012

A Company had entered into a contract with a proprietorship concern for providing Car Hire service for the period starting from Aug 2012 to Aug 13. The Company was however not satisfied with the services provided by the firm and decided to terminate the contract as specifically mentioned in the Contract. Whether it is required to deduct TDS on Compensation paid for termination of contract???

Please reply. Thanking you in Advance

CA PARAS BAFNA

( Expert )
15 April 2012

In case a single payment (>30000/) or t Total contract amounts+compensation (>75000) to the defaulting contractor exceeds the prescribed limits U/s 194C, you have to deduct TDS @ 1%.

Author : Anonymous

( Author )
15 April 2012

Dear Sir

Is there any specific clause or any case law supporting this?

CA PRAVEEN SINGH

( Expert )
15 April 2012

YES AGREE WITH ABOVE..
TOTAL AMOUNT PAID WHETHER IN FORM OF CONTRACT AMOUNT & COMPENSATION BOTH ARE INCLUDED.IN CALCULATION LIMIT OF Rs 30000 of single bill or Rs 75000 annually.
Rate:-
TDS @ 1% For individual/huf,other than individual/huf.2%
TDS DEDUCTED U/S 194C.

Author : Anonymous

( Author )
15 April 2012

Dear Experts

Section 194C states that

"Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to—

i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;

ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein."

So as per this section TDS is to deducted for any work to be done as per Contract but here a compensation is being paid so whether TDS is to be deducted by the Company???

CA PARAS BAFNA

( Expert )
15 April 2012

"paying any sum" in the first line ...
It includes compensation in this case.

Author : Anonymous

( Author )
15 April 2012

Sir I think we should read it as a sentence. The sentence also states that any payment for carrying of a WORK.