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How much is TDS u/s 194C ?

VUELVE (CA- Student) (351 Points)

29 October 2010

X & Co. (Firm) engaged in wholesale business assigned a contract for construction of its godown building to Mr. Ravi, a contractor. It paid Rs.25,00,000 to Mr. Ravi as Contract Payment. Please tell me which one of the following is correct ?

a) As the payment is made to Company then it comes under 194C, payment to contractors other than HUF or Individual and so 2% on the payment will be deducted as TDS.

Rs.25,00,000 2% = 50,000/-*

b) The same 2% is applicable along with Education Cess & SHEC ?

Rs.25,00,000 2.3% = 57,500/-*

Which one of the above amounts is correct as TDS deduction ?

Thanks & Regards !

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27 Replies

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 29 October 2010

replied here

What is the amount of TDS u/s 194C ?

Bhavin Bhadra (Job) (174 Points)
Replied 29 October 2010

TDS under section 194 will be 2% in case of company.

No cess is applicable on that.

Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15607 Points)
Replied 29 October 2010

Originally posted by : Aditya Maheshwari
	Payment is being made to Mr. Ravi and what is important while determining the rates applicable to deduct TDS is the payee. So the receipient is an individual and hence TDS deductible @ 1% and not 2%. No education cess and surcharge now leviable for TDS deduction on residents except TDS on salary.

bharat (a) (153 Points)
Replied 30 October 2010

here payment receiver is individual than tds is 1% no edu ces and she ces applicable nw in any tds

Vidhya (111 Points)
Replied 30 October 2010

PAyment to Individuals will attract 1% TDS with no edu cess

VUELVE (CA- Student) (351 Points)
Replied 30 October 2010

I thank you all for your replies...!! And still I have another question, i.e., Suppose if the contractor there is not Mr. Ravi and its M/s LMN (P) Ltd, then the amount of TDS is 2% right ? But in my practical experience I have seen parties deducting 2% plus EC & SHEC also.

Please explain me why it is done so when only 2% should be deducted ? LMN (P) Ltd is a Manpower Service Providing company which go contract from a Defense Organisation. And when the Defense paid the Invoice amount every month, it will deduct 2.3% and not 2% to the company (Contractor). Please let me know the reason for deducting EC & SHEC ???

Thanks & Regards..!!

Max Payne (employed) (2569 Points)
Replied 30 October 2010

Hi Vuelve,

TDS u/s 194C is 2% on payments made to companies. Cess on TDS is applicable too if the payment is to companies, and it exceeds100 lakhs in a year

Hence the TDS rate would be 2.06%

VUELVE (CA- Student) (351 Points)
Replied 30 October 2010

But the payments are not exceeding 10 Lakhs per annum, but still 2.06% is deducted as TDS every month. Tell me the reason why it is deducted ?

Please also let me know the source of the above information, as i have never heard or read about that provision anywhere.

Max Payne (employed) (2569 Points)
Replied 30 October 2010

Sorry Vuelve, i left out a word in the above post....

Read as below:

TDS u/s 194C is 2% on payments made to companies. Cess on TDS is applicable too if the payment is to companies,

and surcharge is also deducted at 10% it exceeds Rs. 100 lakhs in a year

Hence the TDS rate would be 2.06% in your case, and 2.266 if the payment exceeds Rs.100 lakhs.

Faiz Ahmed ( Article Trainee) (1731 Points)
Replied 30 October 2010

@ G.K

Can you give me the source of the above information please !!

Manikanta Raju CA,CWA,(CS) (Industry) (4482 Points)
Replied 30 October 2010

Dear Friend, in your case TDS deductiable @ 2%, EC and SHE is not applicable for the TDS sections other than TDS on salaries.

swapnil (CA Final) (598 Points)
Replied 30 October 2010

TDS on wheather contrator or sub-contractor or advertising contractor same rate as under :

1. individual / HUF = TDS 1% , No educational cess and surcharge.

2. other than individual and HUF { i.e Company and Partnership Firm } = TDS 2% , No educational cess and surcharge.

3. in case of payment to transport contractor with having his PAN no = than don't Deduct TDS, if contractor not having PAN card, than u have to request to transport contrator to open PAN card and wait 4 some days, if Transport contrator denieing to open PAN card, than deduct TDS 20%. { PRACTICALLY I AM DOING }

for more details pls see d attachment.

thanks 4 sharing with us and best of luck,

Attached File : 57 49 tds chart fy 2010 11 1 .pdf downloaded: 192 times

Dattatray (Account Executive) (51 Points)
Replied 01 November 2010

Hiii.. Frnds

TDS is applicable @ 2 % because M/s LMN (P) Ltd is company.

and secondly about education cess is not applicable is any type of TDS.

Education cess is only applicable in 192 B (Salary).

Ajay Mishra (Company Secretary) (74332 Points)
Replied 01 November 2010

Under the Indian Income Tax Act, the following provisions relate to the Tax Deduction at Source from payments to Contractors and Subcontractors under section 194C.

· Person responsible for paying any sum for carrying any work to any resident contractor should deduct tax at source.

· Tax should be deducted at source only if the contract is between the contractor and the following specified persons:

1. The Central Government or any State Government.

2. Any local authority.

3. Any corporation established by or under a Central, State or Provincial Act

4. A company

5. Any Co-operative Society.

6. 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.

7. Any Society registered under the Societies Registration Act, 1960 or any law corresponding to that Act in any part of India.

8. Any Trust.

9. Any University established by or under any Central, State or Provincial Act or any institution declared to be a University under the University Grants Commission Act.

10. Any firm.

11. Any individual or Hindu Undivided Family whose books are required to be audited under section 44AB during the immediately preceding financial year. [The turnover from business/profession exceeds the limits specified u/s 44AB during the immediately preceding financial year].

12. Association of persons or Body of Individuals, whether incorporated or not, whose books are required to be audited under section 44AB during the immediately preceding financial year.

Important Note: As per section 206AA, with effect from 1.4.2010, every person who receives income subject to TDS under chapter XVIIB (covers all TDS cases) shall furnish to the deductor, his PAN. If PAN is not so furnished, the rate of TDS will be at the rates specified in the Act or at the rates currently in force or at 20% whichever is higher. Please note that this applies to non residents also.

Individual or HUF need not deduct tax if the contract is exclusively for personal purposes.

· Income Tax should be deducted at the time of payment or credit to the account of the contractor whichever is earlier.

· Income Tax is to be deducted at source @ 1% if the contractor/sub contractor payee is an individual or HUF. Payment of amounts to persons other than Individual/HUF would attract TDS rate of 2%.

· Provisions of Section 194C are applicable only where the contract is either a “contract for carrying out any work” or a “contract for supply of labour for works contract”. Hence, these provisions are not applicable for payments made under the contract of sale of goods.

For the purpose of this section, the following contracts are also included in the scope of “Work”:

1. Advertising.

2. Broadcasting and telecasting including production of programs for broadcasting and telecasting.

3. Carriage of goods and passengers by any mode of transport other than Railways.

4. Catering.

5. Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer.

but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.