TDS deduction under section 194C

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mohit (Querist)
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14 April 2011 one of my client is sole properitor, his turnover is 30 Lakhs,he makes payment to one contractor of 1.5 lakhs, should he deduct TDS?

ca cs shriyans jain

ca cs shriyans jain (Expert)
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15 April 2011 If his Last yr turnover doesnt exceed 40 lacs then not requird to deduct TDS. U/s 194C

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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15 April 2011 If the previous year (FY 2009-10) turnover was below 40 Lacs, then there is no need to deduct TDS.

mohit

mohit (Querist)
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16 April 2011 dear sir,

Is this concludes that if the sole properitorship concern doesn't required for the Audit of Accounts, then he is not liable to deduct TDS U/s 194C

Sir plz state the reason Also.......
thanx

CA. Krishna K Neeraj

CA. Krishna K Neeraj (Expert)
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19 April 2011 W.e.f. 01/10/2009, provisions of section 194C has been changed. Now, in your clients case, TDS is required to be deducted as no exemption to Individual having business income is available.

mohit

mohit (Querist)
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20 April 2011 But in Section 194C it is written that, individual and HUF whoe's Accounts are Audited have to deduct TDS.

So,if sole properitor concern having turnover of 30 lakhs that means it does not require to deduct TDS..

plz suggest the query..........

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Great question! Here’s the **clarification on TDS deduction under Section 194C for individuals and proprietors**:

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### Background:

* Earlier, **Section 194C** required only **individuals/HUFs whose accounts are audited** under Section 44AB of the Income Tax Act to deduct TDS on contract payments.
* This meant:

* If an individual or proprietor’s business turnover was below the audit threshold (usually ₹1 crore or ₹50 lakhs depending on the nature of business), **no TDS deduction was required**.

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### Key Change Effective 1st October 2009:

* The proviso regarding audit applicability was **removed**.
* Now, **all individuals and HUFs engaged in business or profession are liable to deduct TDS on contract payments** under Section 194C **regardless of turnover or audit applicability**.

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### So, for your client (sole proprietor with turnover ₹30 Lakhs):

* **Yes, TDS deduction is required** on payment to contractors of ₹1.5 Lakhs or more, as per threshold limits.
* The **audit exemption does NOT exempt him anymore from deducting TDS** under Section 194C.

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### Supporting legal points:

* The Finance Act 2009 amended Section 194C, removing the exemption for individuals and HUFs whose accounts are not audited.
* Now, TDS deduction is **mandatory on payments exceeding ₹30,000 per contract or ₹1,00,000 aggregate in a year** to a contractor.

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### Summary:

| Condition | TDS Deduction Required? |
| ------------------------------------------------------------------ | -------------------------------- |
| Individual/Proprietor with turnover audit limit | Yes |

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### Bottom line:

Your client **must deduct TDS under Section 194C** on payments made to contractors even if turnover is below audit limits.

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If you want, I can help you with the exact TDS rates and threshold limits applicable for Section 194C payments. Would you like that?

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