Sec 194c -capital expenditure & tds provision

Whether payment to contractor for  construction of building would attract Sec 194C as there is no

revenue expenditure and the same would add to the cost of building and not claimed as expenditure

in P & L A/c

Replies (2)

Dear Rohan,

TDS is required to be deducted on any income taxable as per the provisions of the Income Tax Act, 1961.

When you are paying for construction of a building, the payment is taxable in the hands of the constructor and hence TDS is required to be deducted Under Section 194C as per the specified rates.

194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to—.........................

Note the underlined words. 

Any payment in pursuance of contract will attract TDS.

TDS to be deducted at the time of payment or credit, whichever is earlier.

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