TDS on Contract Bill

TDS on Contract Bill

As per the Income Tax Act 1961 u/s 194-C and 194-I the payments made in lieu of contracts made by one party to another is liable for TDS. Previously it was straight away 2% charged on the contracts and 1% on sub contracts. But now amendments have been made in this regard which says that it would be 1% from the contracts received from individual or HUF and 2% from others. However for the subcontracts the rate remains the same. As per the amended rates it has been implemented that a company who has its annual turnover more than 1 crore would have their TDS deduction at the rate of 1.33%.

In case of Transport contracts if PAN is provided then there would not be any deduction for TDS from 1st of Oct 2009 till 31st March 2010. However if PAN is not provided then the TDS deduction would be 1% for Individuals and HUF and 2% for others.

Exceptions are there for the entire Bhutanese clients where the Indian transport agency charges TDS at the flat rate of 3%.

Modifications have been made in case of the TDS deduction for the rent paid on plant and machinery, land and furniture etc. Earlier for the Plant and Machinery the TDS were deducted at a rate of 10%. And in case of land and buildings, furniture and fixture the rate was fixed at 15% for Individuals and HUF and rest was 20%.

However the recent changed 194-I section says that, the TDS for the rent paid in respect of Plant, Machinery and Equipments would be 2% and for the Land, Buildings Furniture and Fixture the rate would be 10%.

All these changes have occurred from 1st Oct 2009. So quiet obviously if any payments have been made earlier to this will not attract the revised rate.