Tds on reimbursement 194c

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

03 April 2015 A is paying Rs.50000 to B as reimbusement of Labour charges (separate bill for reimbursement). B is paying the same amt.to C (Labourer).
Whethere A is required to deduct tds u/s 194C for payment to be made to B ?
Whether B is required to deduct tds u/s 194C for payment to be made to C?

Whethere both transactions i.e.payment by A to B & B to C requires tds deduction?

CA. SHIVA SHANKARA R. SHETTY

CA. SHIVA SHANKARA R. SHETTY (Expert)
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03 April 2015 1. Reimbursement of labour charges will not attract sec. 194C. Because, there is no contract between A & B. It is only reimbursement of the expenses incurred by B behalf of A and now the amount returning back.

2. Payment by B to C, will attract tds u/s. 194C, in case there is contract. Otherwise, the provisions of tds on salary comes to the picture.

Querist : Anonymous

Querist : Anonymous (Querist)

03 April 2015 is there any circular showing that no tds deductible on reimbursement u/s194C?

CA. SHIVA SHANKARA R. SHETTY

CA. SHIVA SHANKARA R. SHETTY (Expert)
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03 April 2015 Why circular?
Section 194C itself clearly says that..

CA. SHIVA SHANKARA R. SHETTY

CA. SHIVA SHANKARA R. SHETTY (Expert)
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03 April 2015 Section 194C read as follows:

Any person responsible for paying any sum to any resident for carrying out any work including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to—

(i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;

(ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family,

So, it is clear that, 194C applied to any work including supply of labour for carrying out any work, in pursuance of contract bewteen contractor and a scecified person .. .

1. The section covers only supply of labour and doesn't covers reimbursement of labour charges.
2. There must be contract between contractor and contrctee.
3. In the absence of contract, it will not taxed u/s. 194C.

I think, your question has been resolved.

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