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of <h1>New Circular Clarifies 2% Tax Deduction for Contractor Payments Under Sec 194C, Aligns with Supreme Court's Ruling.</h1> The circular addresses the deduction of income tax at source under Section 194C of the Income-tax Act, 1961, specifically concerning payments to contractors and sub-contractors. It clarifies that tax should be deducted at 2% on gross payments, including the cost of materials supplied by the government or other specified entities, as per the Board's Circular No. 86. This decision follows the Supreme Court's ruling in Brij Bhushan Lal's case, which focused on income computation rather than Section 194C interpretation. The circular emphasizes that no modifications are needed to the existing guidelines and instructs state disbursing officers to comply accordingly.
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