Unravelling TDS Rules: Section 194C Explained

Section 194C of the Income Tax Act, 1961 mandates TDS deduction on payments to resident contractors or subcontractors by entities like governments, companies, and co-operative societies. The 'work' includes activities like broadcasting, advertising, and catering. TDS rates under Section 194C are 1% for individuals/HUFs and 2% for other entities, with a 20% rate if the PAN is not provided. TDS must be deducted if a single payment exceeds Rs.30,000 or total payments in a year exceed Rs.75,000. Timely TDS deposit is essential to avoid complications. Understanding 194C TDS rates and deduction rules could ensure compliance and avoid future issues.

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Key Takeaways

Section 194C mandates TDS deduction on payments to resident contractors and subcontractors

Payments from governments, companies, co-operative societies, and universities fall under Section 194C

'Work' under Section 194C includes broadcasting, advertising, catering, and specific manufacturing

Contractors execute work for entities, while subcontractors take on work assigned by contractors

194C TDS rate is 1% for individuals/HUFs and 2% for other resident entities

A 20% TDS rate applies if the payee fails to provide a PAN

TDS deduction is required if a single payment exceeds Rs.30,000 or total annual payments exceed Rs.75,000

TDS is not applicable on payments for personal purposes or if the payer's business turnover is below specified limits

Frequently Asked Questions
All
Section 194C mandates TDS deduction on payments to resident contractors and subcontractors under specified conditions.
The Section 194C TDS rate for individuals and Hindu Undivided Families is 1%.
The Section 194C TDS rate for other resident entities is 2%.
A 20% TDS deduction applies if the payee does not provide a PAN.
The thresholds for TDS deduction under Section 194C are as follows: Single payments exceeding Rs.30,000 or total payments in a year exceeding Rs.75,000.
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