07 December 2013
dear sir, my client has paid material assortment charges without deducting the tds. what is the rate applicable on it? and consequences for non payment of tds?
20 July 2025
1. Nature of Payment Material assortment charges usually relate to service charges paid for sorting, arranging, or managing materials. Such charges are generally treated as payment for services. 2. Applicable TDS Section & Rate If the payment is towards services, TDS is typically deducted under: Section 194C – if it’s a contract for carrying out work (contractor) Section 194J – if it is a professional or technical service Material assortment is usually part of a contractual service, so Section 194C applies. The rate of TDS under Section 194C is 1% for individuals/HUF and 2% for others (firms, companies) on the gross amount paid. 3. Consequences of Non-Deduction The payer is liable to pay the TDS amount along with interest and penalty under Section 201 of the Income Tax Act. Interest is charged at 1% per month or part of the month from the date TDS was deductible to the date of payment. Penalty may also be levied. The deductor has to file a TDS return with the details of the deduction.
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