1. What is Section 194IC?

 

Section 194IC deals with any person responsible for paying any sum to the resident contractor for carrying out any work (including the supply of labor), in pursuance of a contract between the contractor and the following:

 

1. The Central Government or any State Government

 

2. Any local authority

 

3. Any corporation established by or under a Central, State or Provisional 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 needs for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both

 

7. Any society registered under the Society Registration Act, 1980 or under any such corresponding law to the Act in any part of India

 

8. Any trust

 

9. Any university or deemed university

 

10. Any firm

 

2.  What is the meaning of work for the purpose of Section 194IC?

 

The expression, “work” in this section would include the following:

 

1. Broadcasting and telecasting including production of programs for such broadcasting or telecasting

 

2. Carriage of goods and passengers by any mode of transportation, other than railways

 

3. Manufacturing or supplying of a product according to the requirement or specification of a customer by using the materials purchased from such customer, but does not include manufacturing or supplying of a product according to the requirements or specifications of a customer by using the materials purchased from a person, other than such a customer.

 

3.  What is a sub-contractor as per Section 194IC?

 

A “sub-contractor” would mean any person:

 

1. Who enters into a contract with the contractor for carrying out, or

 

2. For the supply of labor for carrying out the whole or part of the work undertaken by the contractor under a contract with any of the authorities or

 

3. For the supply of, whether wholly or partly, any labor which the contractor has undertaken to supply in terms of his contract with any of the authorities mentioned under this section.

 

4.  What is TDS to sub-contractor?

 

As per the provisions of Income Tax Act, any person (being a contractor and not being an individual or a Hindu Undivided Family) responsible for paying any sum to any resident in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labor for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labor which the contractor has undertaken to supply shall,  at the time of credit of such sum to the account of the sub-contractor or  at the time of payment thereof in cash or  by the issue of a cheque or draft or by any other mode, whichever is earlier  deduct the amount equal to 1 % of the sum as income-tax on income.

 

5.  Where is the payment made to sub-contractors? What conditions must be satisfied?

 

Payment is made to a sub-contractor who is resident within the meaning of Section 6 of the Income Tax Act, 1961

Payment is made by a resident contractor, not being an individual or a HUF

Payment is made to carry out any work, including the supply of labor

The sum should be credited or paid by the contractor in respect of a contract undertaken by him with the specified bodies

 

6.  When does TDS under Section 194IC need to be deducted?     

 

The person responsible for making payment to resident contractor/sub-contractor should deduct TDS, either at the time of crediting such sum to the account to the payee   at the time of payment thereof in cash or by an issue of a cheque or by any other mode, whichever is earlier.

 

7. What is the rate of TDS?

 

1. 1 Payment/Credit to resident individual or HUF 1% 20%

 

2. 2 Payment/Credit to any resident person other than individual/HUF 2% 20%

 

3. 3 Payment/ credit to transporters NIL 20%

 

 

8.  Under what circumstances TDS u/s 194C is not deductible?

 

No tax is required to be deducted in the following cases:

 

1. Where the sum paid or credited in pursuance of any contract does not exceed Rs. 30,000, or where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year does not exceed Rs. 1,00,000 the person responsible for paying such sums will not deduct TDS under this section 194IC.

 

2. No individual or HUF shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for the personal purpose of such individual or any member of HUF.

 

3. No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his PAN, to the person paying or crediting such amount feedback.

 

9. Time limit within which tax is to be deposited

 

Where the payment is made by or on behalf of the Government, tax must be deposited on the same day. Where the payment is made in any other case than the government, if the amount is credited in the month of March, tax must be deposited on or before April 30^th. In other months, tax must be deposited within 7 days from the end of the month in which the deduction is made.

 

10.  TDS at a lower rate

 

According to Section 194C, where the AO is satisfied that the total income of contractor or sub-contractor justifies the deduction of income tax at any lower rate or no deduction of income-tax, as the case may be, the AO shall, on application made by the contractor or subcontractor in this behalf give to him such certificate as may be appropriate.

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