TDS U/S 194C: Introduction

Simplified version of section 194c: TDS on contract.

Let me introduce two dummy persons

1. Mr Ram (expert)

2. Mrs Ram (little idea of provisions of sec 194c.)

Mrs Ram: who are required to deduct TDS u/s 194?

Mr Ram: Any person who is responsible to pay a resident contractor any sum for carrying any work shall deduct TDS u/s 194c

Mrs Ram: oh my god, so even i have to deduct TDS if i pay any amount to contractor for any work and pay such tax to government and file return? It will be a huge burden on people like us.

Mr Ram: well, there is exemption in case of individual etc. i.e., individual is not required to deduct  TDS in following two cases.

1. Not subject to tax audit during immediately preceding financial year.

2. Work undertaken exclusively for personal purpose.

Mrs Ram: Thanks god, at least in above two situation we common man are saved from complying cumbersome provisions of act. So for others who need to deduct tax, is there any limit of payment beyond which tax has to be deducted or even on payment of single penny tax is to be deducted?

Mr Ram: yes, there is limit of amount beyond which tax has to be deducted. The amount are

a. Credit or payment of single sum exceeding Rs.30000.

b. Total amount of payment or credit exceeding  Rs. 75000. during a financial year.

In the above case through single payment is not exceeding Rs 30000, aggregate payment exceeds Rs 75000. Thus payer has to deduct TDS. Practically in respect of first two payments, entire amount would have been paid but from last payment TDS shall be deducted.

Mrs Ram: ok fine, so what is the rate at which TDS shall be deducted?

Mr Ram: It depends upon the nature of payee.

So, in above example let assume payee is individual then payer has to deduct 1% on Rs.(29500+29000+28000)=865. Thus last payment would be Rs 28000-865=27135.

Mr Ram : Now when you came to know so much, always keep following points in mind too.

- For section 194c, work means

a. Advertising

b. Broadcasting and telecasting and production of progRammes for broadcasting and telecasting

c. Carriage of goods and passenger other than by railways

d. Manufacturing or supply of product as per requirement of customer by using material purchased from  such customer only.

- If payee is engaged in plying, hiring ,leasing of goods carriage, no TDS shall be deducted on payment of freight if he furnishes PAN to payer.

- Contracts involving professional and technical services would not be covered u/s 194c.

- Tax shall be deducted on gross value only ie., no allowance for any exemption or deduction is allowed u/s 194c.

Thanking you

Pawan Tewari