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Interest on TDS u/s 194C

Sakshi Gumbar (Chartered accountant) (122 Points)

05 January 2009

A has entered into a contract with B during the year for Rs. 19000/- without intention to have any contract in future. A did not deduct TDS on this as the limit to deduct TDS for single contract is 20,000/- for a year. Thereafter it had no choice and had to get some more work done from B for which hepaid Rs. 50,000/- more. A deducted TDS on full amount of 80,000/- and deposited tax.

Whether A should also deposit interest on late deduction and deposit of TDS on Rs. 19000/- and Why?

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11 Replies

Shudhanshu Agrawal (Business) (2570 Points)
Replied 05 January 2009

TDS will be deducted on the whole amount and the reason being TDS under Section 194C is deducted payment or due which ever is earlier and TDS was applicable on Rs. 19000 when it was due with this interest will be applicable but that willbe on Rs. 19000

Sakshi Gumbar (Chartered accountant) (122 Points)
Replied 05 January 2009

But his liability to deduct and deposit TDS arose only after he paid Rs. 50,000/- Earlier the payment of Rs. 19000/- was not liable for TDS deduction as the amount was less than 20,000/- . Accfording to me he has not made any default than why interest

Rakesh (Service) (35 Points)
Replied 15 January 2009

i agree with sakshi answer.

Liability of interest arise only when you Liable for TDs and made late payment on Due date.

CA rakesh

New Delhi

9953271402

Shudhanshu Agrawal (Business) (2570 Points)
Replied 15 January 2009

but that liability arose with retro respective effect

Ameet (L) (1678 Points)
Replied 15 January 2009

THE LIABILITY WILL ARISE ONLY AFTER THE AMOUNT EXCEEDS RS. 20000/-. THERE WAS NO LIABLITY WHEN PAYMENT WERE RS. 19000/-

Pawan Mittal (55 Points)
Replied 27 January 2009

The duty to deduct TDS arose on the day you paid Rs. 50,000/-. The TDS to be deduted on Rs. 19000/- and 50000.00. No interest is payable.

Abhinav Agarwal (M.Com C.A SAP Consultant) (814 Points)
Replied 29 January 2009

Hi..

IT Act no where says that if you are going for a contract of Rs. 50000 in installments and Ist installment being less than 20000 than u need not deduct TDS. Tax liability arises as soon as you come to know that you will be dealing with the party of contracts more than 50000.

However, this can be used to avoid deduction of tax at earlier stage. So you need to have solid proof to show that initially you were planning only for 19000 contract. But later due to certain circumstances you entered into some more contracts with the same party. And also the intention of assessee is not to jump any IT provisions as the tax is deducted on whole amount at subsequent stage.

Regards,

Avneesh Kakkar (associate) (26 Points)
Replied 04 April 2009

wanted to know if TDS u/s 194c in case of salary can be claimed from income tax authority if salary does not exceeds the exemption limit?

CA JAIMIN TRIVEDI (C.A.) (308 Points)
Replied 04 April 2009

TDS has to deducted only if first contract itself is of Rs.20000 and above or above. Your lialibity in this case arises only after the second contract, when it exceeds Rs.50000/-. You can deduct TDS on total contract of Rs.80000/-. You have to deduct TDS only when in instalments also your contract value exceeds Rs.50000/-.