Will TDS be applicable

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RAMNATH.R (Querist)
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10 December 2007 We paid a Government Agency for Security Provided...will TDS be applicable under sec194C... we came across some individual claiming that there is no TDS when it is paid to a government organisation...can anyone give us clarity...

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)
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10 December 2007 I did not find any clause in section 194C regarding non deduction of taxes from Government Agency. However it apperas that CBDT is of the view that- no TDS is required to be deducted from Government Agencies, being they are not liable for Income Tax.

You may refer q. no.4 of Circular No. 715 dated 08/08/1995, where in it is said that:-

"......It may, however, be clarified that the payments made directly to Doordarshan may not be subjected to TDS as Doordarshan, being a Government agency, is not liable to income-tax."

CA. Vineet Grover

CA. Vineet Grover (Expert)
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11 December 2007 Hi Ramnath,

As per Sec 194C any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and

(a) the Central Government or any State Government; or

(b) any local authority; or

(c) any corporation established by or under a Central, State or Provincial Act; or

(d) any company; or

(e) any co-operative society; or

(f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or

(g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or

(h) any trust; or

(i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or

(j) any firm; or

(k) any individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor,

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, in case of advertising,

(ii) in any other case two per cent,

of such sum as income-tax on income comprised therein:

Provided that no individual or a Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family.]

It is quite evident that TDS is applicable for all type of assessees.

Rgds/

Vineet

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