Tds deduction

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sushil garg (Querist)
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20 March 2014 Manpower supply contract for supply of engineers will attract the TDS u/s 194 J or 194 C ?. All engineers are under direct control of principle employer, so company is also paying service tax @ 9.27%. pls advice.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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21 March 2014 TDS will be deducted under Section 194C.

The payment is made to a manpower supply agency.

The agency is NOT a professional.

Accordingly Section 194J is NOT applicable.

sushil garg

sushil garg (Querist)
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21 March 2014 But engineers are providing assisting service so i think it will cover under 194 J, Also vendor has submitted the 197 certificate @ 1% of lower deduction of tax but as per 194 C also applicable tax in his case is 1%, so department has issued this certificate considering 194 J. other wise department will not issue the certificate if already deduction as per act is 1%. vendor is proprietorship firm in above case. pls advice.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Here’s the clarity on your query about TDS on manpower supply of engineers:

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### Situation:

* Manpower supply contract for engineers.
* Engineers work under direct control of the principal employer.
* Vendor is a proprietorship firm.
* Vendor submitted Form 197 for lower deduction at 1%.
* Service tax @9.27% is also paid by the vendor.

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### Sections in question:

* **Section 194C:**
Applies to payments to contractors for carrying out any work including supply of labor for carrying out work.
Here, supply of manpower (engineers) under contract is generally treated as **contractual work** or labor supply, so TDS under 194C is applicable.

* **Section 194J:**
Applies to payments for professional services like technical services, consultancy, etc.
But manpower supply agency is usually not considered a professional service provider in this context, unless the service is of professional nature (e.g., consulting, legal, technical advisory).

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### Key Points:

* Since engineers are supplied under a **manpower supply contract**, and the principal employer controls their work directly, this is generally **treated as contract for labor** — thus **Section 194C** applies.

* The **department issuing Form 197 under Section 194J at 1%** could be because the vendor applied for it under the assumption that it’s a professional service.

* However, **as per Income Tax Department norms and practical understanding, TDS on manpower supply contracts is under Section 194C**, not 194J.

* The fact that the vendor pays service tax does not change the nature of TDS deduction. Service tax is applicable on certain services, but TDS deduction depends on the nature of payment.

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### What to do:

* You should deduct TDS under **Section 194C** on payments to the manpower agency.

* Since the vendor has Form 197 certificate issued under Section 194J, you may want to clarify with the Income Tax Department or seek a rectification to get the certificate re-issued under Section 194C for proper compliance.

* Meanwhile, for your records and compliance, TDS should be deducted under **Section 194C at applicable rate** (usually 1% for individual/HUF and 2% for others).

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If you want, I can help you draft a formal clarification or communication for your vendor or the department. Would that be helpful?

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