TDS ON PAYMENT MADE TO PARTNER

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This discussion clarifies TDS applicability for a partnership firm that sub-let work to a partner and paid interest on contract dues. TDS is applicable under Section 194C for the sub-let work. However, TDS is not required on interest paid for delayed contract payments, as this is considered compensatory and doesn't fall under the definition of interest for TDS purposes.

abhijeet m. deshpande

abhijeet m. deshpande (Querist)

26 May 2022 A partnership firm, which is a government contractor has sub-let work to one of its partners. The firm has also paid interest on this contract account dues. Is TDS applicable for the sub-let work and Interest payments made to the partner.

Saurabh Anokhchand Jain

Saurabh Anokhchand Jain (Expert)

28 May 2022 Yes, TDS is to be deducted u/s 194C (SubContractor).

w.r.t. Interest on Delay payment - interest on delayed payment is compensatory in nature and does not get covered under the definition of interest as provided under section 2(28A) of the Act, thus no TDS is to be deducted. (refer: ITO v. Parag Mahasukhlal Shah [2011] 46 SOT 302 (Ahmedabad Tribunal), Shree Venkatesh Paper Agencies (Hyd.) (Pvt.) Ltd. v. DCIT)
Hope this resolves your query!

abhijeet m. deshpande

abhijeet m. deshpande (Querist)

31 May 2022 Very precise. Thank you sir !

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