Clarification on TDS Deduction Requirements under Sections 194C and 194J of the Income Tax Act

[Sandeep Anand]

Dear Sir,

This is to write to seek clarification regarding the TDS ( deduction requirements under sections 194C and 194J of the Income Tax Act. Specifically, I would appreciate your guidance on the following scenarios:

1. Under Section 194C: In April 2023, we made a payment of Rs. 20,000/- to a contractor and did not deduct TDS since the transaction amount was below Rs. 30,000/-. However, in the following month, we made another payment of Rs. 50,000/- to the same contractor and deducted TDS at the rate of 2% (Rs. 1,000/-). The total payment made to the contractor during the year is Rs. 70,000/-, which does not exceed the threshold limit of Rs. 100,000/-.

   My query relates to whether it is mandatory to include the TDS deduction for our first payment of Rs. 20,000/- when calculating the TDS for the second payment of Rs. 50,000/-. In other words, should we deduct 2% of the cumulative amount (i.e., Rs. 70,000/-) for TDS purposes?

2. Under Section 194J: If a similar situation arises where multiple payments are made to a professional or technical service provider, should we include the TDS deduction of the previous payments when calculating the TDS for subsequent payments? I request your expertise and guidance on these matters. Thanks & regards - Sandeep

AI Summary

Clarification on TDS Deduction for Contractors and Service Providers under Sections 194C and 194J of Income Tax Act A participant sought clarification on TDS deduction under Sections 194C and 194J of the Income Tax Act, questioning whether TDS should be deducted on cumulative payments to contractors and service providers. Responses indicated that under Section 194C, TDS should be deducted on the cumulative amount once payments exceed Rs. 30,000 in a single transaction or Rs. 100,000 annually. For Section 194J, TDS is required if payments exceed Rs. 30,000. The consensus was that TDS should be calculated on the total amount once the threshold is crossed, regardless of individual transaction amounts.