What is section 194C of Income Tax Act ?
As per section 194C of Income Tax Act, any person who pays money to the resident contractor (or subcontractor) for carrying out any work (including the supply of labor ) is required to deduct tax on such payment.
Who is required to deduct TDS u/s 194C?
- Any specified person making payment to a resident contractor for carrying out work is required to deduct TDS.
- Any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, except if such person, has total sales, gross receipts or turnover from business or profession carried on by him exceeding one crore rupees in case of business or fifty lakh rupees in case of profession] during the financial year immediately preceding the financial year
What is the point of time for deduction of TDS u/s 194C?
TDS u/s 194C shall be deducted at earilier of
- The credit of income to the account of the payee (receiver) or
- Actual payment (in cash, cheque, draft or other modes)
Read Also : TDS on Lottery, Games, Betting and Game Shows
What is the TDS rate u/s 194C?
The rate of tax deduction u/s 194C is-
when payment is given to Individual/HUF then TDS rate is 1%
when payment given to others then TDS rate is 2%.
If the deductee fails to quote his/ her PAN to the deductor i.e. then the TDS rate will be 20%.
What is the limit for tax deduction u/s 194C?
TDS shall be deducted u/s 194C in the following cases:
Particulars | Amount |
Single payment of a contract | Exceeds Rs. 30,000 |
Aggregate payment of a contract for F.Y | Exceeds Rs. 1,00,000 |
When are the exemptions to TDS payments under Section 194C?
TDS under Section 194C is not required to be deducted in the following cases:
When any amount is paid to the contractor by an individual or HUF for carrying out work in the nature of personal use.
The amount of payment made to the contractor in a single contract does not exceed Rs.30,000.If the aggregate amount of such contracts in a financial year exceeds Rs.1,00,000, TDS will be deducted.
If payment is made to a non-resident contractor or sub-contractor.
When payment is made to a goods transport agency (in the business of plying, hiring, or leasing goods) that owns 10 or fewer carriages at any time during the previous year, the contractor must also submit a declaration of the above along with PAN.
Read Also : TDS on income from winning from horse races
How to calculate TDS in case of composite work u/s 194C?
As discussed above, when work includes manufacturing or supply of a product as per a customer’s specification by using the material purchased from him/her. In such case, TDS will be deducted on:
Invoice value excludes the material’s price (if it is indicated separately in the invoice).
Total invoice value when the price of the material is not indicated separately.
What is the Time Limit on Depositing TDS under section 194C?
Particulars | Time limit to deposit TDS |
If the amount is paid or credited in the month other than March | Within 7 days from the end of the month is which deduction is made |
If the amount is paid or credited in the month of March | On or before 30th April |
What is the Time Limit for TDS Return for section 194C?
The deductor i.e Payer is liable to deduct tax under Section 194C of the Income Tax Act. They shall file a Quarterly Return of TDS in Form 26Q.
Particulars | Due Date |
April - June | 31st July |
July - September | 31st October |
October-December | 31st January |
January - March | 31st May |
What is the Time Limit for issuing of TDS statement for section 194C?
The deductor shall be liable to provide a TDS Certificate in Form 16A to the deductee. The deductor can download the form from the TRACES.
Particulars | Due Date |
April - June | 15th Aug |
July - September | 15th November |
October-December | 15th February |
January - March | 15th June |
What are the consequences of non-compliance with section 194C?
Levy of Interest: If the specified person does not deduct the TDS or deduct the TDS but is not deposited to the government on time, then interest is required to be paid on such amount.
Disallowance of expenses: Also, the person is not eligible to claim the deduction of such expenses from PGBP income if TDS is not deducted on time. The amount of disallowed expenses shall be 30% of the payment.
However, if TDS is deposited in subsequent years, then expenses will be allowed in the TDS payment year.
