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Current Year Turnover vs Tds

Eswar Reddy S (CFO- at NHTF) (58213 Points)

13 May 2022

FY-2021-22 , Turnover: 1.5Crores
FY-2022-23, Turnover : 40lacs

Carrying business through ABC PVT LTD

Payment to be made to Contractor(Company) ,in the current month : 2lacs .

Is 194C applicable?

What if
FY-2021-22 , Turnover: 40lacs
FY-2022-23, Turnover : 1.5Crores

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7 Replies

Kev Men (756 Points)
Replied 13 May 2022

As per 194c, Since the deductor is a Company (ABC pvt ltd), the Turnover limits are irrelevant.
The Company will need to deduct TDS at 2% (as deductee/contractor is company) and amount exceeds 1 lakh in aggregate.

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Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 14 May 2022

What if the deductor and deductees are individuals ?

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Kev Men (756 Points)
Replied 14 May 2022

When the deductor is individual,
the Turnover in the preceding year should exceed Rs 1 crore inorder to be liable to deduct TDS u/s 194c.
So in the first case, since turnover in FY 2021-22 is more than 1 crore, TDS will need to be deducted in FY 2022-23 on payment of 2 lacs (since it exceeds 1 lakh aggregate limit) @ 1% (for individual deductee) and 2% (for company deductee).

in the second case, since turnover in fy 2021-22 does not exceed Rs. 1 crore (since it is 40 lacs), TDS will not be deducted on payment of 2 lacs in FY 2022-23 as TDS provisions u/s 194c are not applicable.

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 14 May 2022

Current Year turnover is irrelevant. Why ?

Kev Men (756 Points)
Replied 14 May 2022

As per section 194c, when the deductor is company, it has to deduct TDS u/s 194c irrespective of its turnover. Hence, it is irrelevant in the context of the company deductee.

When the deductor is individual, as per Explanation 1(l)(B) to section 194c, the individual
[B] has total sales, gross receipts or turnover from business or profession carried on by him exceeding one crore rupees in case of business or fifty lakh rupees in case of profession] during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor;

Since the section itself mentions 'preceding' financial year, the current year turnover is irrelevant to decide the applicability of TDS u/s 194c.

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 14 May 2022

FY-2021-22 , Turnover: 40lacs
FY-2022-23, Turnover : 1.5Crores

Current Year Tax Audit is applicable for individual carrying business.

But Tds provisions not applicable ?

1 Like

Kev Men (756 Points)
Replied 14 May 2022

Yes, TDS u/s 194c will not be applicable for fy 2022-23 even though the tax audit will be applicable for fy 2022-23. The tax auditor cannot qualify/raise a query for non-deduction of TDS u/s 194c in fy 2022-23.