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Tds for employees on contract

madhu (CA FINAL) (190 Points)

06 August 2015

Dear friends,

I have a query regarding employees who work under a contract. A governmnent company has employed persons on contract basis and they are working as other employees of the company and the contract is extendable for lifetime. So should the company deduct TDS under section 194C and if so which ITR is that employee going to file ?

Kindly help me out

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7 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 06 August 2015

It depends on the nature of work. If it is professional work then TDS would be deducted u/s 194J and if it is towards other work (as defined in 194C), TDS would be deducted u/s 194C. If such income is professional income then ITR4 to be used but if such income is business income then an option to file ITR4S is available.

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madhu (CA FINAL) (190 Points)
Replied 06 August 2015

Thanks for your reply poornima.

The employee is working with the HR department of the company ..so i think that would not be considered as professional services . So TDS Would be deducted under 194C ..then which ITR needs to be filed?

CMA Poornima Madhava (CMA) (13097 Points)
Replied 06 August 2015

I think it will be considered as consultancy services and provisions of 194J will be applicable.

Aseem Watts (CA Final) (289 Points)
Replied 06 August 2015

Yeah Poornima, it will be deducted u/s 194J. The said employee will raise invoice charging service tax if applicable and employer will pay the amount after deducting TDS u/s 194J.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 06 August 2015

I have perused the discussions above.

The driving factor will be the terms of appointment between the person/employer and tax payer/employee. Ultimately the onus is on the payer to deduct tax at source at correct rates - either section 192A or 194J.

Regards,

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 06 August 2015

Furher, a situation may arise that the person proviidng consultancy service ( if such a theory is adopted) might need to charge service tax if the basic exemption limit of 10 lakhs is crossed and comply with cumbersome service tax law !

Regards,

sanjay (B.Com) (21 Points)
Replied 10 August 2015

Dear Sir, i am salaries employee of pvt company and also having side income under 194(c) for providing professional service Sir, I would like to ask which ITR form is applicable or suitable for filling Read more at: /profile.asp?member_id=85931