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Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024
Section 194C of the Act provides for TDS on payments to contractors at the rate of 1% when the payment is being made or credit is being given to an individual or HUF and 2% in other cases. Section 194J of the Act relates to TDS on fees for professional or technical services wherein the applicable TDS rates are 2% or 10% depending on the nature of payment being made.
2. Clause (iv) of the Explanation of section 194C defines “work” to specify which all activities would attract TDS under section 194C. However, there is no explicit exclusion of assessees who are required to deduct tax under section 194J from requirement or ability to deduct tax under section 194C of the Act. Therefore some deductors are deducting tax under section 194C of the Act when in fact they should be deducting tax under section 194J of the Act.
3. In view of the above, it is proposed to explicitly state that any sum referred to in sub-section (1) of section 194J does not constitute “work” for the purposes of TDS under section 194C.
4. The amendment will take effect from 1st day of October 2024.
Full Text:
Exclusion of professional fees from contractor TDS rules clarifies which payments require withholding under professional services provisions. The amendment expressly excludes sums covered by section 194J from the definition of 'work' in the Explanation to section 194C, removing overlap where payments for professional or technical services could otherwise be taxed as contractor payments; the change is framed as an anti avoidance clarification and takes effect from 1st October 2024. of Press 'Enter' after typing page number.
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