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

TDS aggregation: include prior payments when thresholds under sections 194C and 194J are crossed, triggering deduction on total.
Payers must consider prior payments when determining TDS liability. For contractor payments, statutory carve outs apply to single payments up to thirty thousand and to an annual aggregate exemption of one lakh; some advisers state that if a later payment causes a threshold to be crossed the payer must deduct TDS on the entire cumulative amount paid in the year. For professional and technical service fees, amounts are aggregated for the financial year and, once the aggregate threshold is exceeded, TDS is to be deducted on the total amount paid or credited.