There is a duty of payer to deduct TDS u/s 194 C on making of payment/credited to contractor. Contractor includes a sub-contractor. In this article we will discuss about the TDS deduction and related procedure on payment to contractors & sub contractors.

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Contractor and Sub-contractor

Giving service to someone for the price is called contract. Service provider will be called contractor. The contractor’s duty is to complete the task for which an agreement has executed. When contractor further enters into a contract with another person to do the jobs completely or partly that is called sub-contractor.

It may be any work, deduction u/s 194C will be applicable when the contracts are made for any work. The following are the positions when the liability will arise.

Any works examples like broadcasting, advertisement, carriage of goods, catering, any services, You can find more examples by visiting this link;

When payer will deduct TDS/Time to deduct TDS?

Payment should be more than Rs. 30,000 for one contract/each contract or Rs.75000 in total for all the contracts. The deduction will be made when the payment credited or paid.

When the amount exceeds Rs. 30,000 then the deduction will be made on earlier amount also. The section 194 C is applicable for resident contractor only. For non-resident the section 195 will be applicable.

On which amount TDS has to be deducted?

TDS will be deducted on the amount credited or paid for the services used. However, in the case of manufacturing or product in which the services have involved then the amount to deduct TDS is only for service used, if it is mentioned in the invoice. However, if there is not a separate amount for service, then the TDS will be deducted generally on the total amount of invoice.

Who will deduct TDS?

On the above payment TDS will be deducted but by whom? The following persons will deduct TDS.

  • A state or central Government, local authority or corporation under the state or central Government
  • Company
  • Society/Co-operative society
  • Trust/Authority for development of areas
  • Foreign enterprises
  • University
  • Firm
  • Individuals or HUF or AOP or BOI

Individual/HUF/AOP/BOI who has gross receipt/Sale/Turnover

  • For business: more than Rs. 1 crore (w.e.f.1/4/2012, A.Y.2013-14) Rs. 60 Lakh for A.Y. 2012-13.
  • For profession: Rs. 25 Lakh (w.e.f.1/4/2012, A.Y.2013-14), Rs. 15 Lakh for A.Y. 2012-13

Examples of work contracts

Bank charges, oral contracts, piece rate contracts, advertisement contract, broadcasting contracts, travel agents, airlines, clearing & forwarding contracts, courier agencies, catering contracts, Professional & technical services and other contracts.

No TDS deduction on Payment to Transporters if PAN furnished

If the operators furnish his PAN to the deductor then deductor should not deduct TDS. But deductor will give the valid ‘PAN’ detail in the ‘Quarterly returns of TDS’ of the deductees within the time limit to get the exemption. It will be done only in the case of transporters, who engaged in the business of plying, hiring or leasing goods carriages.

Rates of TDS

The rates of TDS for making payment to contractors or sub-contractors for A.Y. 2013-14 are given below:

  • If payment make to individuals/HUF – 1% (SC-NIL, EC & SHEC-NIL)
  • If payment make to other person – 2% (SC-NIL, EC & SHEC-NIL)

Note: TDS shall be deducted @ 20% in case a deductee fails to furnish his Pan to the deductor (Sec. 206AA)

TDS will be deducted on Total amount of Bill including service Tax

If services of contractor are liable for service tax, the invoice’s total amount includes the service tax, then the deductor will deduct TDS on total amount of invoice including service tax also.

The other provisions like online deposit of TDS, Issue of TDS certificate, Quarterly Returns of TDS and penalty on failure to deposit TDS or statements are common like other nature of payments to deduct TDS.

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  • surendra

    i am not satisfy with that TDS will be deducted on Total amount of Bill including service Tax

    • admin Lessmytax

      What why?? Please ask your question or query regarding this, so that I can explain according to relevant section.

    • prince

      why

  • JAI BHASIN

    TDS rates for individuals for making payments to contractors wrongly mentioned in your topic- rates of TDS @1% whereas in chart @2%

    • prithviraj

      194C aggregate value crossed 75,000 /- will tds has to pay along with interest

  • boobalan

    i need tds rate for courier charges

    • Mahesh

      1% if Individual & 2% for all others

    • Dia.Chawhan

      TDS on Courier Charges @ 2%

  • A.P.S

    Most firms deduct 1% for contractors with registered firms, however this one firm insists on deducting 2% for works contracts including supply of material, the deductions are made on the total invoice value. As per your recommendation it appears the TDS is deductable only on the service/labour component, its associated service tax and only at 1%. Have I understood this correctly?

  • A.P.S

    Most firms deduct 1% for contractors with registered firms, however this one firm insists on deducting 2% for works contracts including supply of material, the deductions are made on the total invoice value. As per your recommendation it appears the TDS is deductable only on the service/labour component, its associated service tax and only at 1%. Have I understood this correctly?

  • gladson e rebello

    suppose we gave the printer to print the visiting card of the company, broucher of the company ..etc do we have to deduct tds for the same

    • Dia.Chawhan

      Section 194I Rent of Plant Machinery & Equipment Amt. Limit 180000 p.a @ 2% TDS will he deducted

  • Rama

    not satisfy

  • Gaddam Sudhakar

    While doing Online Payment of TDS there is Company Deductee and non company Deductee, what is that?

  • M. BHUNIYA

    TDS DEPOSIT ON WHICH CODE FOR COURIER SERVICE PAYMENT

  • adarsha km

    i need to know the TDS on security charges

  • adarsha km

    how can i file sales tax on online????

  • SRIDHARA.G

    Please inform me the latest section code 194IA & 194IB. Whether 194IA section code refers to
    TDS recovered on Rent payable/paid towards land or building & rate of TDS is it 10% & sec.code
    194IB pertains to TDS on rent payable/paid towards machinery or plant. Whether under 194IB
    rate of TDS is 2% & whether any threshold limit is there for 194IB.

  • Bharat Jadhav

    HI, how can i pay the interest on TDS for contractors, i mean i need to pay the interst on tds. but it the time time of payment, i am confused to choos the section like that if i am paying the TDS on contract i choose 94C.

  • KUMAR

    I KNOW TDS IS APPLICABLE ON THE COURIER CHARGES, KINDLY HELP ME WITH THE LIMIT.
    I HAD PAID RS.32,400.00 IN THE F.Y. 2012-13 APPROX RS.2700.00 PER MONTH SO KINDLY ADVISE WHETHER I HAVE TO DEDUCT TDS ON THE AMOUNT.
    SOME WHERE I READ THAT IF ONE BILL CROSS RS.30,000.00 OR YEARLY BILL (NO. OF BILLS DURING THE YEAR) CROSS RS.75,000.00 THEN ONLY I HAVE TO DEDUCT THE TDS FROM THE BILL.
    KINDLY ADVISE.

    • shivakumar K s

      If you have paid 32400 in one shot of payment you can deduct Tds or If you deducted for each payment no problem..

  • ankita

    whether a textile co has to deduct tds on jobwork expence for 2012-13
    where its total turnover along with its subsidiary exceed 60,00,000 for the 2011-12??

  • sud

    What about Government Contractor……??? What is the Rate Applicable to them??????
    Explain…………….

  • Limiya Joy

    please give me information regarding TDS rates for contractors Payment

  • hari prasad

    but how to find out service tax component after TDS is being deducted from the total bill amount which was inclusive of service tax? when service tax liability comes i want to know what amount of service tax can be paid as tax from the whole amount which i said above. suggest me
    suppose total bill amount is Rs.100000 inclusive of service tax , TDS is 10% on the which comes to 1000. so, can any body tell me what is the service tax component out of this ?

  • isha

    gser

  • chaitali

    i am having a query regarding TDS for contract based teachers…can u help me ..i have no idea about all this things….i was working on contract as teacher in training institute with salary Rs.4000/- pm. I worked for 12 months and by totalling varing amounts i got in this 12 months is approx. Rs.43,000/- . I left the job on 31 Jan 14 . now 2 days back i got call from institute saying they need my pan card number and as my payment is above 30,000 so i have to pay TDS 10% = 3100 rupees. I am not having any idea about this.
    hope i will get an answer from you how this thing is calculated. i have already left my job 2 months back. So still i need to pay this amount??

    Kindly advice