Is TDS has to be deducted on Capital payments

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This query is : Resolved

Prasanna Kumara B (Querist)

27 June 2008 A Company has given a contract to Contractor for construction of office building for Rs.10 lakhs. Is it company has to be deduct the TDS on contract charges?

Shekar

Shekar (Expert)

27 June 2008 Yes..company has to deduct TDS on contract charges at the rate of 2.06% or 2.26%

Azmathullah Khan

Azmathullah Khan (Expert)

27 June 2008 Yes,

U can devide the material & service charges, like Centring work & material, profession fee for building design, painting work, labour work.
If the contractor is suppling the material and submitting the bill then the TDS is not applicable on material supply, or else 2.266% will be charges on 10L.

Prasanna Kumara B

Prasanna Kumara B (Querist)

27 June 2008 contract expenses should be capitalized in relation to building construction and not effected on revenue in nature. So if company has not be deduct TDS on Contract charges, there is no disallowed of contract charges u/s 40a(ia) (because of these expenses are not reflected on P/L a/c or Income and Expenditure a/c)
Kindly reply proper comment of the above

Azmathullah Khan

Azmathullah Khan (Expert)

21 October 2008 To Us it is the capital expenditure, but for the contractor it is an income & Revenue cent percent the TDS to be deducted on contract on building

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