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Tds on service charge

Pushpak Lal (Student CA Final ) (286 Points)

08 June 2016

I have a contractor for supplying me manpower for Housekeeping. The Bill is as follows: Housekeeping Charges-50000 Service Charge ( @ 10%)- 5000 Total Bill 55000 Please clarify on what amount is TDS to be deducted? (i.e whether it is to be deducted on only manpower charges -50000 or including service charge -55000 .?

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CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 08 June 2016

Sec 194C(1) provides that any person responsible for paying any sum to resident contractor for carrying out any work (including supply of labor) in pursuance of a contract 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—
(i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;
(ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family,
of such sum as income-tax on income comprised therein.
"Such sum" includes service charges. Hence Tds is to be deducted on Rs.55,000.

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