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Tds 194c

23 February 2016

Hello, One of my client facing problem while payment to contractor. Total amount of Bill is Contractor amount Rs.27200 + service tax Rs. 3944 Total Rs.31144/- TDS limit for deducting TDS in 194c is Rs.30000/- there is no specification whether its inclusive service tax or exclusive. Now query is, whether he should deduct tds or not??? bcoz if we consider before service tax, then its below Rs.30000/- Please help me in this matter.

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16 Replies

Raghavendra (Accountant) (53 Points)
Replied 23 February 2016

TDS is to be deducted from the income of the recipient.Service tax is not an income of the service provider as the service provider would be collecting service tax from the service receiver and depositing this amount with the govt. So, the service tax
collected is not an income of the service provider and the service provider is merely acting as an agent of the Govt.
So, the logically TDS should not be deducted from the amount inclusive of service tax and should be deducted from the amount exclusive of service tax

And the Govt in its Circular No. 1/2014 dated 13th Jan 2014 has also said the same. According to the latest circular issued by the Govt in this regard, TDS is to be deducted on the amount exclusive of service tax if the service tax amount is shown separately. As in most of the cases, Service Tax Amount is disclosed separately in the Invoice, TDS in all such cases would be deducted on the amount exclusive of service tax.

If the payment that is being made to the contractor does not exceed Rs. 30,000, No TDS on payment to contractor is required to be deducted. However, if the total of all such payments made or to be made during a financial year exceeds Rs. 75,000; TDS shall be deducted under Section 194C

Prateek (Partner) (143 Points)
Replied 23 February 2016

Agree with Mr. Raghavendra

Mansi devani (CA) (73 Points)
Replied 23 February 2016

Thanks sir,

As per your opinion,

"If the payment that is being made to the contractor does not exceed Rs. 30,000, No TDS on payment to contractor is required to be deducted. " Now que is whether 30,000/- is exclusive or inclusive service tax?

Mansi devani (CA) (73 Points)
Replied 23 February 2016

Thanks sir,

As per your opinion,

Deepak sharma (Learner) (1431 Points)
Replied 23 February 2016

As Mr Raghavendra clearly clarified Exclusive of Service Tax

1 Like

Raghavendra (Accountant) (53 Points)
Replied 23 February 2016

Exclusive of Service Tax

Mansi devani (CA) (73 Points)
Replied 23 February 2016

Cut off amount :If the credit or the payment in pursuance of the contract does not exceed Rs.30,000/-, no deduction has to be made at source. However , if the aggregate of all amounts paid/credited or likely to be paid/credited exceeds Rs. 75,000/- then tax at source is to be deducted.

HERE SHOWS THE CREDIT OR THE PAYMENT AMOUNT. Hence we have to pay amount inclusive of service tax. Is it ok?

Mansi devani (CA) (73 Points)
Replied 23 February 2016

sir, i know its exclusive service tax . i agrred with you. but still i am confuse for cut off limit. for calculating cut off limit, whether inclusive or exculsive consider?

(Guest)

i think people are not understanding the question properly...

@ mansi is not talking about the calculation of tax deduction, the question is about whether u consider service tax while checking the limit for deduction of tax (30000,75000)

i think that the words "payment" or "credit" to contractor means the agregate value of payment to be made...i think it should include Service tax as it is the part of contractor's Invoice...and its safe too...as the ambit of compliance increases.

ish kumar sharma (Sr. Manager Accounts & Finance) (301 Points)
Replied 23 February 2016

hi there, as far as my thinking is concerned the agreegate amount of 30000 or 75000 here means exclusive of service tax as the provisions of TDS doesnt cover the portion of service tax then how the clouse of 30000 or 75000 would include the portion of service tax. please correct if i am wrong coz the same was the issue in one of scruitiny case i handled but my point was accepted by JCIT in that concerned case.

(Guest)

Service tax is not included in calculation of TDS because "service tax" is not the income of the service provider ( as he will deposit the same)..

The words in the provision is not "total income" should be lower than rs 30000...its "payment"

when u pay a contractor, u also pay service tax...

thats my argument...but ur makes sense too..there should be a better explanation somewhere on the internet.

ashish (article) (151 Points)
Replied 24 February 2016

Mansi in your case TDS shall be deducted as it exceed threshold limit but TDS shall be deducted on amount exclusive of services tax portion...

1 Like

sagar (1) (43 Points)
Replied 24 February 2016

u hv to take the amount before service tax.since the amount is lessthan 30000 no tds is applicable

Akshit Batra (Partner) (56 Points)
Replied 24 February 2016

See, it is a small amount, and there's no point getting into hassless for petty issues. It is advisable that you deduct TDS on amount excl. of service tax. Assessing Audthotiry may/ may not agree to exclusion of Service Tax for computation of cut-off limit.