- 1 Section 194C – TDS on Payment to Contractor:
- 2 Section 194i- TDS on Rent
Section 194C – TDS on Payment to Contractor:
We often get confused which charging sections to use Section 194c or 194i.
Let,s deal it with Clarity:
What is Section 194C?
Deals with: Payments of any amount to Contractors or Sub-Contractors.
Section 194C states that any person responsible for paying any sum to resident contractor for carrying out any work (including supply of labor),
In pursuance of the following contract between the contractor and the following:
- Any company
- Any university or deemed university
- The Central Government or any State Government
- Any local authority
- Any corporation established by or under a Central, State or Provisional Act
- Any co-operative society
- Any trust
- Any firm
- Any authority constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the needs for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both
- Any society registered under the Society Registration Act, 1980 or under any such corresponding law to the Act in any Part of India
Now let’s define,
the meaning of work for the purpose of Section 194C.
The expression “work” in this section would include-
- Broadcasting and Telecasting including production of programs for such broadcasting or telecasting;
- Carriage of goods and passengers by any mode of transportation, other than railways;
- Manufacturing or supplying a product according to the requirement or specification of a customer by using the materials purchased from such customer, But does not include manufacturing or supplying a product according to the requirements or specifications of a customer by using the materials purchased from a person, other than such a customer.
Now, Let’s deal with;
Section 194i- TDS on Rent
Persons who are having rental income from Land, Building, Plant & Machinery, Furniture & fittings etc.
What is the Meaning of ‘Rent’ in reference to Section 194i?
- ‘Rent’ means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any:
- Land or
- Building (includes Factory Building) or
- Land appurtenant to a building (includes Factory Building) or
- Machinery or
- Plant or
- Equipment or
- Furniture or
- whether or not any or all of the above are owned by the payee-Explanation (i) to Sec. 194-I.
- Sub-letting is also covered.
- Also, If the landlord collects security or advance payment at the time of letting out a building to a tenant on the condition that the deposit will be refunded at the time of vacating the building, then such a receipt is not in the nature of income and, therefore, no tax is to be deducted at source u/s 194I.
- However, Advance Rent (not in the nature of refundable security deposit) paid is, subject to tax deduction. Moreover, where any such rent is credited to ‘Suspense Account’ OR to any other account shall also be liable to deduct Tax Deducted at Source.
Payments Covered u/s 194I?
- Income from letting out of factory building
- Rent includes service charges
- TDS requirement where building and furniture, etc., let out by separate persons not payable on monthly basis
- Charges regarding cold storage facility
- Hall rent paid by an association for use of it
- Payments to hotels for holding seminars including lunch.
Now while determining which charging sections to use. Use following steps;
- determine if your case predominantly falls within Rent or Contractor;
- then whichever section is predominant follow above guide if it meets the definition and changeability.
- If one fails then it’s probably the other one.
DISCLAIMER; The above guide is just extracts of the 194c and 194i. I highly recommend anyone to study complete amended text provided by http://www.incometaxindia.gov.in. For Complete Text CLICK HERE and search for the relevant section.