TDS Deduction Rate

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 January 2011 We are a advertising agency company.
Our sister concern is a beta film editing studio - rendering ad film making etc.

Regularly we (Ad Agency)give ad film works to them (sister Concern), which we receive from our clients.

Now actually at what rate, we have to deduct tds on our sister concern?

Our Sister Concern always raise a bill as lumpsum.

for your information till last year we have deducted tds on them at professional fees rate

Can we (ad agency) make a contract agreement between us and sister concern and deduct tds on Contract rate basis?
is it correct. if yes, the contract can be made in Rs.20 stamp Paper?

Please clarify

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)

24 January 2011 I think in this case TDS is to be deducted on payment u/s 1974C. You can be part of contract, but it is not compulsory.

Value of stamp paper change state to state, as per the value of contract.

Querist : Anonymous

Querist : Anonymous (Querist)

24 January 2011 Sir,

The Section you mentioned to my querry is 1974C?????
Is the section number is correct.

any professional can help me please

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

27 July 2025 Hey! Looks like there was a typo in the section number mentioned earlier.

For your query:

* **TDS on payments to sister concern (for ad film work)** is typically deducted **under Section 194C** (Payment to Contractors) if the service is considered a contract work.

* Alternatively, if the payment is for professional services (like consultancy, technical work), **Section 194J** applies.

**Which section applies depends on the nature of the service:**

* Film editing, ad film making — generally treated as **contract work**, so **Section 194C** @ 1% (if payment is to individual/HUF) or 2% (if payment to others) applies.

* If the service is purely professional (technical/consultancy), then **Section 194J** @ 10% applies.

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### About your specific questions:

1. **Can you deduct TDS under contract rate?**

Yes, you can deduct under Section 194C (contract) if the work is contract in nature.

2. **About the contract agreement on Rs. 20 stamp paper:**

* The contract can be made on stamp paper of appropriate value as per your state’s stamp duty rules.

* Rs. 20 stamp paper is generally used for agreements of lower value, but it's best to check the state-specific stamp duty rates.

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### Summary:

| Service Type | TDS Section | Rate |
| ------------------------------ | ----------- | -------------------------------- |
| Contract work (ad film making) | 194C | 2% (others), 1% (individual/HUF) |
| Professional services | 194J | 10% |

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If you want, I can help draft a simple contract or provide more detailed info based on your specific services! Want me to?

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