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Section 194C


Section 194C

BACKGROUND
Section 194C or in other words “TDS on Contract” is a very commonly used section and about 1/3rd of assessees are likely to get taxed due to this section. This Section was introduced mainly to tax at the point where payment is been done by assessee in respect of any work contract. However, Section 194C includes certain possibilities where small taxpayers have to face certain cumbersome problems and formalities for which certain exemptions and relaxations were been provided. We will also get to know about New ammendments effective from 1st June 2015.

PROVISION
Any Amount paid by any payer to payee in respect of any work contract shall be liable for applicability of section 194C or better say payer shall be liable to deduct TDS at a specified rate on such amount.

Now following question may arise:-
Who are the payer?
Ans. Payer includes following person:-
1) Individual and HUF which are covered u/s 44AB
2) Every person other than individual/ HUF

Who are payee?
Ans. No restriction. It includes every person.

What are the specified rate?
Ans. In case payee is an Individual/HUF then 1% otherwise 2%

Now, you can see that by introducing these exemptions small tax payers or those person who get into a work contract for personal purpose are excluded from Section 194C

Ammendment w.e.f 1st June 2015
Before 1st June 2015, any payment done to a transporter was not liable for deduction of TDS u/s 194C in case transporter provides us his PAN details. However now onwards, payment to only those transporters shall not be liable to get TDS deducted if such transporter holds 10 or less than 10 goods carriage and also makes a declaration in form.


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