WORK CONTRACT TAX

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amit sharma (Querist)
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15 March 2011 WHAT IS THE CONTRACT TAX & ITS PROCEDURE

AND THE TDS APPLIED ON IT ??? IF YES THEN UNDER WHICH TDS SECTION IT WILL COME??

THANKS

Hitender Gaur

Hitender Gaur (Expert)
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16 March 2011 Dear Amit, Work Contract Tax is part of VAT not the Income tax, so there is non section of Income tax TDS applcable on WCT's TDS. Please provide the name of state for which you are seeking details.

amit sharma

amit sharma (Querist)
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16 March 2011 DEAR SIR I WANT THE DETAIL OF LUDHIANA CITY PUNJAB STATE.

WITH THANX & REGARDS
AMIT

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2025 Hey Amit! Here’s a clear summary about Work Contract Tax (WCT) and the related TDS for Ludhiana, Punjab:

What is Work Contract Tax (WCT)?
WCT is a tax levied on the value of works contracts.

It is a state-level tax under the VAT laws, not an income tax.

Works contract involves construction, repair, renovation, or any contract related to building or other civil structures.

WCT in Punjab (including Ludhiana):
Punjab VAT Act governs WCT in Punjab.

The tax rate and procedure can vary, but generally, a percentage of the contract value is deducted as WCT at source.

This means the person making payment to the contractor deducts WCT before paying the contractor and deposits it with the government.

Is TDS applicable on WCT under Income Tax?
No, WCT is not covered under Income Tax TDS sections.

WCT is a VAT deduction at source, not an income tax deduction.

Income tax TDS (like under Section 194C for contracts) may be applicable separately depending on the nature of payment.

Procedure:
Deduction of WCT:
The person responsible for making payment deducts WCT (usually around 1-4%, depending on state rules) from the payment amount.

Deposit with Government:
The deducted amount must be deposited to the state government treasury within prescribed time.

Certificate Issuance:
The deductor provides a WCT certificate to the contractor, which can be used to claim credit or adjustment against VAT liability.

Filing Returns:
Both deductor and deductee must file periodic returns as prescribed under Punjab VAT rules.

TDS Under Income Tax (Section 194C):
For contract payments (including works contracts), TDS under Section 194C applies.

The rates are typically:

1% for individual/HUF contractors

2% for others (companies, firms).

This is separate and in addition to WCT under VAT.

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