TDS deducted on total amount or only o service charge

[yujin kim]

Dear sir

 

We have paid TDS on contractor as below for years.

MANDAY	20,130
OT	4,767
TOTAL	24,897
PF 13.61%	548
PF 12%	483
SUB TOTAL	24,414
Service Charge 10%	2,490
Service tax 10%	249
Edu 3%	7
Payable	27,160
TDS 1%	272
TOTAL	26,889

 

We have deducted TDS on total amount ( which is mandays , over time, service tax all is included)

But contractor worker 's salary is monthly below than 4,500 Rs, so that TDS not applicable.

But we've deducted from total amount, so that TDS is deducted from contractor worker's salaries also.

So, that I think it is unfair.

so my suggestion is like this.

 

MANDAY	20,130
OT	4,767
TOTAL	24,897
PF 13.61%	548
PF 12%	483
SUB TOTAL	24,414
Service Charge 10%	2,490
Service tax 10%	249
Edu 3%	7
Payable	2,490
TDS 1%	25
TOTAL	27,135

 

We deduct TDS only from service charge which is conractor labour's profit.

 

Can you guide us which case is correct ?

and as per rule, which one is the right one..

[MOHAN S]

One must read Section 194C to see the answer. Section 194C starts with the word "Any sum payable to a contractor..... So I am unable to accept TDS is applicable only on service charge and not on whole amount. This view is incorrect and against the provisions of law. The TDS has to be deucted on the gross amount paid including Sevice Tax as Central Board of Direct Taxes has clarified that "Service Tax" can be excluded only in respect of payments u/s 194I Payment towards "Rent"

[yujin kim]

Dear sir

 I read  194C. but not mentioned detail deduct on which amount. I agree we should deduct service tax included amount. But I don't understand why deduct from total amount.(worker's manday, overtime also included.)

so that my suggestion is as below.

MANDAY	20,130
OT	4,767
TOTAL	24,897
PF 13.61%	548
PF 12%	483
SUB TOTAL	24,414
Service Charge 10%	2,490
Service tax 10%	249
Edu 3%	7
Payable	2,746
TDS 1%	27
TOTAL	27,133

 

I deducted TDS on service charge + service tax total amount

Can u please tell me whether my suggestion is correct?

Waiting for your reply.

[MOHAN S]

Mr.Kim, I clarify that the tax u/s 194C has to be deducted on the total amount paid to the contractor. If the payment is toeards any reimbursement  there the contractor has to produce the Evidence of such expenses. if the same is to be excluded. Otherwise the Tax has to be deducted on the Gross Amount only and this has been clarified several times by the department. If you deduct tax only on Service Charge you are likely to get notice from the department once you file the TDS return. So take care. 

AI Summary

TDS Must Be Deducted on Gross Amount, Including Service Tax, Per Section 194C; Avoid Partial Deductions to Prevent Issues. A forum participant raised a query about whether Tax Deducted at Source (TDS) should be deducted on the total amount paid to a contractor or only on the service charge. The participant argued that TDS was unfairly deducted from the total amount, including workers' salaries, which are below the taxable threshold. Another participant cited Section 194C, clarifying that TDS should be deducted on the gross amount, including service tax, unless specific reimbursements are evidenced. They warned that deducting TDS only on the service charge could lead to issues with tax authorities.