Seeking clarification on applicabilty of Income Tax rules on Mid Day Meal Suppliers.

This query is : Resolved

Suresh Kumar (Querist)
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03 February 2024 Sir
Mid-Day Meal is supplied to students of elementary level by Mid-Day Meal suppliers, Meal is supplied as per rate fixed by the Government. For example, the rate fixed per student is Rs 12 / per day. The supplier supplies food at the rate of twelve rupees per student on each day. It is a no-profit activity. However, when the payment is made to the supplier at the end of the month towards the supply of mid-day meals, my office has been directed to deduct tax from the amount to be paid to the supplier. My question is -- Since the supplier has not earned any profit in the entire process of supplying meals, is he required to pay tax ????

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 February 2024 2% tax under section 194c will be deducted as payment to contractor. File ITR and claim back as refund in case of no profit.

Hari Beldona

Hari Beldona (Expert)
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04 February 2024 1. Section 194C deals with the provisions for tax deduction at source at the time of payment to contractors
2. any person who pays money to the resident contractor or carrying out any work (including the supply of labour ) is required to deduct tax on such payment.
3. is required to deduct tax on such payment
4. he above condition also requires the existence of a contract between the contractor and the contractee.
5. is required to deduct TDS.
6. The term ‘work’ includes: Catering
7. The rate of tax deduction u/s 194C is-
• 1% (when payment is given to Individual/HUF) or
• 2% (when given to others).
• In this case 1% an individual
And the time of deduction is earlier of
• The credit of income to the account of the payee (receiver) or
• Actual payment (in cash, cheque, draft, or other modes)
If the PAN is unavailable, the TDS rate jumps to 20%,

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