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Tds on construction works

Vipin Kumar Sharma (Accounts & Finance Manager) (219 Points)

01 March 2017

ABC Pvt Ltd Co Given Contract to XYZ pvt ltd co for construction of a shed in Rs. 48.00 lac including material. But amount is Not Specified in p.o. that how much amount for material & how much for Labour charge. Rs 45.00 lac given advance to XYZ co. in last three month. But not deducted any tds. Is there any TDS liability on advance given if yes than which amount we will deduct TDS. Please clear briefly.

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7 Replies

(Guest)

if materil supply no tds if labor work 2% for company and for other 1%

Vipin Kumar Sharma (Accounts & Finance Manager) (219 Points)
Replied 01 March 2017

Contract is including labour charge & material also

(Guest)

then the payment u received minus tds

RUCHI LUTHRA (Practicing Chartered Accountant) (27 Points)
Replied 01 March 2017

Hi Vipin,

Yes you need to deduct TDS @ 2%. The liable to deduct TDS arises at the time of booking invoice or making payment, whichever is earlier. So If you make the advance payment, TDS liability arises. In case of composite contract i.e. include Labour and material. TDS is dedcutable.

In case you need any further advice. you can contact me at ruchi.luthra @ icai.org

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(Guest)

it is better if tds is deducted for tax purpose for both

parties and this is march month is going on it will

help u for reducing tax liability and here invoice

is not given to come to know how much is material

and labor

kiran (Student) (98 Points)
Replied 01 March 2017

Q.NO:1 When liability of deducting TDS arises (i.e.,whether on advance payment TDS has to be deducted?)

Liability to deduct TDS arise on

a. on actual payment

b.at the time of credit which ever is earlier.

In this case as the payment (i.e., advance payment) is made earlier TDS has to be deducted at the time of payment.

Q.NO:2 Whether to deduct TDS on the value of Labour only or on both the value of Labor and material (Since do not know the segregation of labor and material)

Your case is a composite Case.( i.e., contract consists of both usage of materials and labor)

As the contractee is not supplying the materials to the contractor the contractee has to deduct TDS on both the value of material and labor i.e., on Gross payments.

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