Applicability of rate in TDS

[BHASKER MURALI]

We have paid amount of Rs:90,000/- towards hire Charges upto 30-9-2009 but we have not deducted TDS U/s.194I, and in the month of October, 2009 we have paid an amount of Rs:50,000/-. So, whether we have to deduct TDs @ 2% on whole or 10% on payment made before 30-9-2009 and 2% after september,2009. Please advice

[Surender Gupta]

The provisions of section 194C have been amended with effect from 1.10.2009 as well as the provisions of section 194I have also been amended with effect from 1.10.2009. Therefore, you need to deduct TDS for the transaction prior to 1.10.2009 at the old rate and transactions on or after 1.10.2009 at the new rate.

[DEV KUMAR KOTHARI]

View of Shri Surendra Gupta is correct and based on play safe basis. However, in case when payments of Rs.90000/- till 30th Sept. (to one and the same party)were made,as per contract /MOU etc. for hiring then prevailing it was not likly that payment shall exceed Rs.120000/- in the year, then tax was not deductible from rent/ hire u/s 194 I. However, it should be established beyond doubt that it was not likely that payment shall exceed Rs.1,20,000/- in the year. (In case of contract limit of Rs.20K per contract and 50K per year will apply) you can explore possibility whether S.194C can be more appropriately applied in given facts.

AI Summary

Clarification on TDS rates for hire charges: Old rate before 1st Oct 2009, new rate after; Section 194I may apply. A query was raised about the correct rate of Tax Deducted at Source (TDS) applicable to hire charges paid before and after 1st October 2009. The initial payment of Rs. 90,000 was made before 30th September 2009 without TDS deduction, and Rs. 50,000 was paid in October 2009. One response clarified that TDS should be deducted at the old rate for payments before 1st October 2009 and at the new rate thereafter. Another response agreed but noted that if the total payment was unlikely to exceed Rs. 120,000 annually, TDS might not be required under section 194I.