Section 194C of Income Tax Act – What does it Mean

Section 194C of Income Tax Act states that a person is entitled to pay a sum of contribution to the resident contractor for carrying out work which includes supply of labor, and has been defined in a contract between Contractor and body.

Here the body does bring any kind of organization, company, authority which is capable of paying the contractor for the quantity of word processed.

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The Section 194C details with the tax deduction provision at source form the tome of payment to contractors or subcontractors. Thus any contract which is written with the body can take tax exemption under Section 194C if conditions are met.

What does Section 194C of Income Tax Act mean

To know exclusively about the Section 194C, the expression WORK which includes in this section too clearly defined.

As per the Section 194C, Work is like some advertising, telecasting, broadcasting programs, carriage of goods, passenger travel through transportation, catering, supply of products, manufacturing of goods. All such works which may done with a registered authority or firm allowed for Section 194C taxation.

Sub-contractor in Section 194C

A Subcontractor who enters into a contract for carrying out the work along with contractor. An individual who supplies the labour for carrying the part of the word been undertaken by a contractor with proper authority or may someone who partly works for completion of assigned work.

TDS to subcontractor in Section 194C

As per the Income tax act any person being a contract for paying sum of to any reinstate labor, sum of payment in cash or through cheque or demand draft does get a dilution of 1 percent under Section 194C. The rate of interest for sub-contract under Section 194C clearly defined for their payments processed.

TDS deduction under Section 194C

Any person who is responsible to make payment to the resident contractor or subcontractor must deduct TDS in the following conditions below said conditions.

  • While making the payment to the account of payee
  • When paying the thereof in cash for expenses
  • By issuing a cheque or demand draft for the work

Other Party in Contractor as per Section 194C

As per the Section 194C, a contract between the Contractor and other parties is must which allows them to attract for taxation deduction. The other party here must be a legal authority which is as defined below.

  • Contract with Central Government
  • Contract with State Government
  • With any Local Authority
  • Any corporation which established under central or state act
  • Any registered company
  • Cooperative Society
  • Any authority which authorized with any Indian law
  • Society registered under society registration act 1980
  • Trust in India
  • Deemed university or firm

When is TDS under Section 194C tax deductible

There are certain conditions which remit the payee to deduct the taxation amount while paying to the contractor or subcontractor through Section 194C.

  • If the amount that transferred not more than 30,000 INR
  • If the aggregate amount for work done, going to pay or likely to pay in the financial year is less than 1, 00,000 INR.
  • If payee transfer amount to contractor which meant for the contractor personal use
  • Payment made during course of planning, hiring, leasing goods by furnishing PAN
  1. When does the Income tax amount under Section 194C paid?

    The amount of tax liable under Section 194C may paid on the same day or the amount before next month’s last date or within 7 days from end of the month during which the deduction made.

  2. Is TDS applicable to contractors?

    Under Section 194C, TDS applicable if the amount may transferred to the contractor is more than 30,000 INR per month and as well over 1,00,000 INR for the entire financial year. Under these conditions the amount of TDS applicable to entire amount may deducted within a limited period.

  3. What is the rate of TDS under Section 194C?

    Under Section 194C the payer required to deduct 1% during the payment of cash or cheque if PAN available. Else the interest rate may increased to 20% due to not providing the PAN number.