TDS under Sec 194C

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This discussion clarifies the TDS deduction rate under Section 194C for construction contracts, specifically when a government institute engages a contractor for building construction including materials and manpower. The key point is to determine the payee's status. If the contractor is a proprietary entity, the TDS rate is 1%. For other entities, it's 2%. The printed name on the bill is less important than checking the fourth character of the contractor's PAN card (P or H indicates an individual/HUF eligible for 1% TDS).

sanjay ojha

sanjay ojha (Querist)

20 March 2021 Sir
If a contractor is engaged in Construction work and taken a contract of Government Institute for construction of a Building (Material + Manpower) and raise a bill. at what rate of TDS need to be deducted from bill by Government Institute.
condition; Bill printed in name of contractor ( ABC Contractor)
point of doubt is whether contractor's bill is considered as "Individual" or "Others"

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

20 March 2021 Consider it as others and deduct 2% TDS.

PARAS CHHAJED

PARAS CHHAJED

(Expert)

21 March 2021 The status of payee i.e. deductee as per Income Tax Act is to be considered. If the payee is a concern which is proprietary entity the rate of TDS u/s 194C should be 1% as TDS rate in case o Individual ad HUF is 1%. Printed name on bill hard matters. Check 4th Character of PAN and if it is P or H go ahead with TDS rate of 1% only.

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