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Regarding tds on contractor

Sahil (NA) (159 Points)

29 June 2016

A Private Ltd Company made a payment of Rs.180,000/- to Contractor on March 2016. and not deducting TDS yet. Is there any way to avoid penalty for not filing and deducting tds??? Please reply fast

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34 Replies

subhash kumar jha (PROFESSION) (445 Points)
Replied 29 June 2016

No way out.

Expenses will be disallowed.

but there is one way where u can get relaxation is that get a certificate in form 26A from a chartered accountant that deductee has disclosed the amount in their ITR.

For this u will have to furnish ITR copy of deductee and deductee must have shown the amount in their ITR.

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Sahil (NA) (159 Points)
Replied 29 June 2016

Well the contractor is not in contact with us. and I am doubting whether he filed return or not. Is there any possible way to avoid the penalty??? Please sir reply

subhash kumar jha (PROFESSION) (445 Points)
Replied 29 June 2016

No sir g ,

U will be treated as assessee in default

Do one thing show less than 1 lac as payment to contractor and balance as other expenses.

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CA Shweta Purswani (Practicing Chartered Accountant ) (417 Points)
Replied 29 June 2016

Agreed with Subash Kumar Jha Sir,

No way Out is there except the way mentioned by Subash Sir, You will have pay TDS along with interest and revise the TDS return. if the company is covered under tax audit u/s 44AB.

1 Like

Sahil (NA) (159 Points)
Replied 29 June 2016

okk do i have to deposit service on reversal mechanism on contractor payment???

Sahil (NA) (159 Points)
Replied 29 June 2016

Sir how to know whether company is covered under tax audit u/s 44AB

CMA Poornima Madhava (CMA) (13097 Points)
Replied 29 June 2016

In case of Pvt Ltd Companies, relaxation on applicability of 194C is not available if not covered under tax audit u/s 44AB. It is applicable only to individual/HUF. Thus, it is irrelevant for deduction of tax at source in this case.
Further, limit for non-deduction of tax for FY15-16 is 75,000 (not 1 lac as it is applicable from FY16-17 onwards)
44AB is attracted where turnover of the company (in case of business) is >1 crore in the PY and (in case of profession) >25 lacs in the PY.
Further, as already said by others, interest would be levied @ 1.5% pm or part thereof. No penalty is applicable provided the original 26Q is filed within due date.
In case of works contract, service receiver is required to pay ST @ 50% under RCM.

NARENDRA SAHOO (3 Points)
Replied 29 June 2016

it is better to pay fed along with interest and revise the return. and same may be recovered from the contractor in forthcoming payment.

Sahil (NA) (159 Points)
Replied 30 June 2016

Okk. Thankyou so much guys. Poornima Madam @ Can you just tell me in which amt of Work Contract I have to pay ST as the Material and Labour is shown separately in the bill. and at what rate do we have to charge ST as the payment was made in March 2016 of Rs.170,000/-

Sahil (NA) (159 Points)
Replied 30 June 2016

I think CBDT has closed Nil Return formailites.

CMA Poornima Madhava (CMA) (13097 Points)
Replied 30 June 2016

You need to pay service tax under RCM on service portion only (since material and service value are shown separately). Amount payable would be 50% of total service tax liability.
Assuming that service has already been provided by the contractor in/before March itself and payment is made in March 2016, the rate of tax applicable would be ST @ 14% + SBC @ 0.5%. You need to pay 50% of this amount.