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Tds on contractors

avinash annam (C.A-IPCC article student) (79 Points)

03 January 2012

hai friends! can any one help me out from this issue.,

1.can tds be deducted more than the statuatory rates?

2.acc to sec 194c tds on contractors should be deducted if the transaction was morethan 50000 and the aggregate exceeds 75000 what my doubt is for suppose to a party we r not deducted tds because he was with in 75000 if in that year he exceeds 75000 then r we liable to deduct to that excess amount and from that transaction or for the previous 75000 also.

if tds was not deducted on first 75000 is that allowable expenditure acc to it act?

thank u................

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9 Replies

Yogesh Bhandari (CA FINAL Student) (429 Points)
Replied 03 January 2012

1) Yes, tds can be deducted more than the statutory rates but the same shall be deposited.
2) You should deduct TDS on whole amount (75000 as well as that excess amount in that FY).
And, if tds was not deducted on first 75000 then the same is not allowable expenditure according to income tax act,

G.KRISHNA BABU (CA FINAL) (49 Points)
Replied 03 January 2012

Hi Avinash, There is nothing wrong in deducting TDS at more than statutory rate. No need to go to previous year 75,ooo rupees as the amount will be paid to party without TDS. On the next transaction you have to deduct TDS on previous 75,000 rupees also. The previous years expenditure will be allowed.

G.KRISHNA BABU (CA FINAL) (49 Points)
Replied 03 January 2012

Hemant Kumar (Accounts Manager MBA (Fin) CMA*) (6450 Points)
Replied 03 January 2012

You should deduct tds 2% either deductee is company, firm, coop society, local authority or 1 % individual huf on threshold limit of rs. 30000. If you have to pay agrregate amount 75000 or more to deductee in a year then you should have to deduct tds on this 75000.

CA Neil Ganatra (Partner - Gautam Joshi & Co.) (871 Points)
Replied 03 January 2012

If in the same FY it exceeds Rs. 75,000/- then you are required to deduct tax on whole amount and not the amount exceeding Rs. 75,000/-. If you don't make TDS on Rs. 75,000/- then it will not be allowed. Limits given under the TDS provisions are to be seen/referred per financial year.

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CA.kaya (Chartered accountant) (3990 Points)
Replied 03 January 2012

1) nothing wrong in deducting more tax but same should be deposited on time.

2) once limit 75000 crosses u got to deduct tax on full amount paid ..

CA Kiran Sutrave (CA) (428 Points)
Replied 03 January 2012

1. Yes you can deduct TDS at a rate which is more than the prescribed rate but it should be deposited with the Government.

2. TDS is to be deducted if one time payment is more than30,000/- or payment is more than75,000/- in a year.

3. Once the limit of75,000/- is exceeded, TDS is to be deducted on total amount and not on an amount excess of75,000/-.

4. It is sufficient to deduct and deposit TDS on the total amount to the Government on or before the date of filing return. If it deposited before filing return then there is no disallowance of expenses.

Hope this clarifies all doubts.

deepak (C.A & C.S Final) (63 Points)
Replied 04 January 2012

Sir,

i) If the amount paid/payable or credited/likely to be credited to the contractor/sub-contractor does not exceed Rs.30,000/- in a single instance (Applicable from 1.7.2010. previously it was Rs.20,000).

However, the total of amounts paid or credited during the financial year should not exceed Rs.75,000/-. If the said amount exceeds Rs.75,000/-, then, the liability for payment arises on the whole of amount paid or credited and not on the amount in excess of Rs.75,000/-.( The limit of Rs.75,000 is applicable from 1.7.2010. Previously it was Rs.50,000)

ii) if tds was not deducted on first 75000,then it will not be a allowable expenditure according to the act.