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Manpower supply agencies

vengadamani (firm) (24 Points)

22 April 2011

My client is a man power supplying agency. The salary for staff is paid to him and he in turn pays to the employees supplied by him. The company is deducting 10% tax at the time of payment of salary. What form should he submit to the IT department so that tax is deducted at a reduced rate.

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6 Replies

Deepak Tapse (Accounts Manager - Taxation) (1771 Points)
Replied 22 April 2011

Supplying manpower is comes under contract. TDS is deducted 2%

CA. Deepak Narula (B.Com., ACA, DISA) (541 Points)
Replied 22 April 2011

Correct. It comes under section 194C and TDS should be @ 1% if the payee is individual or HUF otherwise it is 2%

Devendra (Chartered Accountant) (4775 Points)
Replied 22 April 2011

1) You need to submit the Income Tax Returns of 3 previous years and also the details of that income in which you want lower deduction or no deduction of TDS. (Application in Form 13)

2) Secondly ,you will have to show a projected income statement and prove the Assessing Officer that your income is lower than the basic exemption limit of the TDS deduction.

Regards,

Devendra K

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 22 April 2011

Originally posted by : vengadamani
	My client is a man power supplying agency. The salary for staff is paid to him and he in turn pays to the employees supplied by him. The company is deducting 10% tax at the time of payment of salary. What form should he submit to the IT department so that tax is deducted at a reduced rate.

look at the agreement between the client and company carefully

if the company is paying gross to your client without bifurcation of no of employees / their individual share then its "manpower supply, which is subject to service tax", at this stage the company is liable to deduct 2% (1% for individual / HUF)

if the company is paying the amount headwise per person but paid to client then the company is booking the expense in salary account, and hence company is deducting the TDS @ 10%

CA Ishaan (Chartered Accountant) (453 Points)
Replied 23 April 2011

Hello,

Section 194C is not applicable for supply of labour in case of supply of labour in case of professional service providers like lawyers, CAs etc. [Moradabad Chartered Accountants Association v. Central Board of Direct Taxes reported in 264 ITR 374 (2003).

Thanks and Regards