This query is : Resolved 

01 February 2011

Dear Experts ,

In the Financial Year 2009-10, Our company has deducted @1% Subcontractors TDS and deposited the same amount in govt. account, we have received a show cause notice from Income tax department with demanding @ 2.26%,
Please guide us .

CA Shailesh Kumar Bhagat (Expert)
01 February 2011

Without knowing the full details , It is very difficult to comment on demand notice. I think IT has taken it as direct contract.

CMA. Subhash Kumar Jha (Expert)
01 February 2011

From 01/10/2009, TDS rates for contractors & sub-contractors were made similar. The only differentiation that was made was on the basis of status of the payee.

In case of Individual or HUF deductee (contractor or sub-contractor) : TDS rate is 1 %

So, in case of any other deductee (contractor or sub-contractor) : TDS rate is 2 %

So, most likely this subcontractor is not falling under Individual or HUF category & the rate of 1 % charged by you is not correct w.e.f. 1/10/09.

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