Section 194C
This query is : Resolved
16 February 2011
SR
Please advice me whether 15G is applicable on 194C
Please advice me whether 15G is applicable on 194C
16 February 2011
15G cannot be used for 194C.
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16 February 2011
sr as the limit per contract is of 30000 in 194C so can i bifercate the single contractors contract into as follows
i) Painting
ii)Steel Binding
iii)Wooden work
iv)misc. contructions
Please advice me as i need to save the TDS as it has not been deducted till yet and all the payments are in cash of below 20000 with no bills raised(only receipt voucher)
can i bifercate the cash payments of single contractor into multiple contractors to avoid the liability of TDS?
Please give your valuable advice
i) Painting
ii)Steel Binding
iii)Wooden work
iv)misc. contructions
Please advice me as i need to save the TDS as it has not been deducted till yet and all the payments are in cash of below 20000 with no bills raised(only receipt voucher)
can i bifercate the cash payments of single contractor into multiple contractors to avoid the liability of TDS?
Please give your valuable advice
16 February 2011
sr as the limit per contract is of 30000 in 194C so can i bifercate the single contractors contract into as follows
i) Painting
ii)Steel Binding
iii)Wooden work
iv)misc. contructions
Please advice me as i need to save the TDS as it has not been deducted till yet and all the payments are in cash of below 20000 with no bills raised(only receipt voucher)
can i bifercate the cash payments of single contractor into multiple contractors to avoid the liability of TDS?
Please give your valuable advice
i) Painting
ii)Steel Binding
iii)Wooden work
iv)misc. contructions
Please advice me as i need to save the TDS as it has not been deducted till yet and all the payments are in cash of below 20000 with no bills raised(only receipt voucher)
can i bifercate the cash payments of single contractor into multiple contractors to avoid the liability of TDS?
Please give your valuable advice
23 July 2025
Under Section 194C of the Income Tax Act, TDS is applicable on payments made to contractors for carrying out works contracts. The TDS rate under this section is 1% for individuals and HUFs (Hindu Undivided Families) and 2% for others, when the payments exceed Rs. 30,000 in a single contract.
Now, regarding your query:
1. Applicability of Form 15G on Section 194C:
Form 15G is used to avoid TDS on certain types of income where the total taxable income is below the basic exemption limit (i.e., Rs. 2.5 lakh for individuals under 60 years).
However, Form 15G cannot be used to avoid TDS under Section 194C. This section applies specifically to contractors, and TDS is mandatory on payments for contracts exceeding Rs. 30,000. So, even if the contractor's income is below the taxable limit, the TDS under Section 194C is still applicable.
2. Bifurcating a Single Contract to Avoid TDS:
No, you cannot bifurcate a single contract into multiple smaller contracts to avoid TDS liability. The law is very clear that Section 194C applies to a single contract, and the aggregate amount paid under that contract is the deciding factor for TDS applicability.
Explanation:
Even if you split the work into different categories like painting, steel binding, and wooden work, all payments made under a single contract or project are aggregated to check whether the threshold of Rs. 30,000 is exceeded.
The Rs. 30,000 limit applies to the total contract value, and the tax is calculated based on the overall contract rather than the individual components (like painting, steel binding, etc.).
Splitting the work into multiple smaller contracts would likely be considered a tax avoidance scheme, and tax authorities may view this as a violation of the provisions under the Income Tax Act, potentially resulting in penalties.
3. Cash Payments and Receipt Vouchers:
If you're making payments in cash and don't have formal bills, it can be problematic. According to the law, payments made to contractors should be supported by proper invoices and agreements. Also, if you're paying in cash, make sure you comply with the Section 40A(3), which restricts deductions for cash payments exceeding Rs. 10,000.
Even if the payments are below Rs. 20,000, it is always advisable to have proper documentation in place (bills, receipts, contracts, etc.) to substantiate the expenses.
Key Takeaways:
Form 15G is not applicable for payments under Section 194C.
Do not bifurcate a single contract into multiple smaller parts to avoid TDS liability; the law considers the total amount paid under the contract.
Ensure that all payments to contractors are made through proper documentation (invoices, receipts), and avoid cash payments exceeding the specified limits.
In case you have already made payments without deducting TDS, you may need to correct this by paying the applicable tax along with interest and penalties as per the tax laws. It’s best to consult a tax professional to handle the situation appropriately.
Now, regarding your query:
1. Applicability of Form 15G on Section 194C:
Form 15G is used to avoid TDS on certain types of income where the total taxable income is below the basic exemption limit (i.e., Rs. 2.5 lakh for individuals under 60 years).
However, Form 15G cannot be used to avoid TDS under Section 194C. This section applies specifically to contractors, and TDS is mandatory on payments for contracts exceeding Rs. 30,000. So, even if the contractor's income is below the taxable limit, the TDS under Section 194C is still applicable.
2. Bifurcating a Single Contract to Avoid TDS:
No, you cannot bifurcate a single contract into multiple smaller contracts to avoid TDS liability. The law is very clear that Section 194C applies to a single contract, and the aggregate amount paid under that contract is the deciding factor for TDS applicability.
Explanation:
Even if you split the work into different categories like painting, steel binding, and wooden work, all payments made under a single contract or project are aggregated to check whether the threshold of Rs. 30,000 is exceeded.
The Rs. 30,000 limit applies to the total contract value, and the tax is calculated based on the overall contract rather than the individual components (like painting, steel binding, etc.).
Splitting the work into multiple smaller contracts would likely be considered a tax avoidance scheme, and tax authorities may view this as a violation of the provisions under the Income Tax Act, potentially resulting in penalties.
3. Cash Payments and Receipt Vouchers:
If you're making payments in cash and don't have formal bills, it can be problematic. According to the law, payments made to contractors should be supported by proper invoices and agreements. Also, if you're paying in cash, make sure you comply with the Section 40A(3), which restricts deductions for cash payments exceeding Rs. 10,000.
Even if the payments are below Rs. 20,000, it is always advisable to have proper documentation in place (bills, receipts, contracts, etc.) to substantiate the expenses.
Key Takeaways:
Form 15G is not applicable for payments under Section 194C.
Do not bifurcate a single contract into multiple smaller parts to avoid TDS liability; the law considers the total amount paid under the contract.
Ensure that all payments to contractors are made through proper documentation (invoices, receipts), and avoid cash payments exceeding the specified limits.
In case you have already made payments without deducting TDS, you may need to correct this by paying the applicable tax along with interest and penalties as per the tax laws. It’s best to consult a tax professional to handle the situation appropriately.
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