TDS on Payment to Contractors u/s 194C

Tax Deducted at Source (TDS) is applicable to the payments made to Contractors.  When a person pays any sum to any resident of India for carrying out any work is responsible to deduct TDS u/s 194 C. The deduction is made either at the time of credit to the account of contractor or at the time of payment, whichever is earlier.

Nature of Work

The ‘work’ comes under TDS are: -

advertising, broadcasting and telecasting, carriage of goods or passengers other than by railways, catering, manufacturing or supplying a product according to the requirements of customers by using the materials purchased from such customers but not included those materials purchased from other than such customers.

Rate of TDS

The rate of TDS at which percentage the amount either credited or paid, to be deducted is as follows:

Particulars	For Individual / HUF	For All Others
Rate of TDS	1%	2%

Threshold Limit

TDS on payment to contractors is not applicable if the Invoice value, credited or paid to the contractors does not exceed Rs.30000/- for single transaction (single invoice) and Rs.75000/- for the whole financial year.

Amount on which TDS is to be deducted

The deduction is to be made from the amount of Invoice including supply of labour for carrying out the work but excluding the value of materials if the value for materials is mentioned separately in the Invoice.  If the value of materials is not mentioned separately, TDS is to be deducted on the whole amount of Invoice.

Who are the persons liable to deduct TDS

The following persons are liable to deduct TDS for contractors:-

1. the Central Government or any State Government
2. any local authority
3. any Corporation established by or under a Central, State or Provincial Act
4. any Company
5. any Co-operative society
6. any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages.
7. any society registered under the Societies Registration Act, 1860
8. any trust
9. any University established under section 3 of the University Grants Commission Act, 1956
10. any foreign government or any foreign enterprise
11. any firm
12. any individual, HUF, Association of persons or a body of individuals whose accounts to be audited under clause (a) or clause (b) of section 44 AB 

•     Cases when TDS is need not to be applicable

If the sum credited or paid to contractor by any Individual or HUF for any personal purpose of such individual or any member of HUF, TDS need not to be deducted by such Individual or HUF.

No TDS shall be deducted on any sum credited or paid to any contractor who carries business of plying, hiring or leasing of goods carriages who furnished his Permanent Account Number (PAN) to the person who pays or credit such sum.

Note: The above given Rates and Threshold limit are applicable to the F.Y.2014-15 and remains the same until any inclusion, exclusion or any modification prescribed by the Income Tax Department.