tds on maintenance charges
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Well, if you are willing to know about TDS U/S 194C or even TDS on Maintenance Charges Under Section 194C, you’re just landed at the right place. Here in this article, we will cover and explain every important factor associated with section 194C of the income tax act. Let’s explore more about TDS section 194C.

A Proper Explanation of Section 194C

As per the section 194C, when “a person” is making payments for any “contract work” to a resident contractor, or a resident sub-contractor, TDS (Tax Deduction at Source) can be deducted before making their payments depending upon circumstances. Even if it is a maintenance job, then also TDS on maintenance charges under section 194C will be applicable.

Clarification of “A Person” As Per Section 194C

According to the 194C of the income tax act, “Any Person” refers to any of the following beings;

  • Any Firm is making a contract with a residential contractor or sub-contractor.
  • Any trust, making a contract with a residential contractor or sub-contractor.
  • Any company is making a contract with a residential contractor or sub-contractor.
  • If the central government, making a contract with a residential contractor or sub-contractor.
  • If the state government, making a contract with a residential contractor or sub-contractor.
  • Any corporation is making a contract with a residential contractor or sub-contractor.
  • Any University is making a contract with a residential contractor or sub-contractor.
  • Any registered NGO, making a contract with a residential contractor or sub-contractor.

Section 194C: Clarifying “Contract Work” 

According to section 194C of the income tax, the term “Contract Work” can be the following;

  • Any manufacturing works
  • Any supply of goods or materials 
  • Any advertising works
  • Any work-related to telecasting any program
  • Any Catering services
  • Any transportation works

Explanation of “Resident Contractor or Sub-Contractor” Under Section 194C

As per section 194C, “a Contractor or Sub-Contractor” is an individual or company responsible for providing services or supply materials as per the contract and receives payments for the same. For instance, even if a contractor is involved in any maintenance job, TDS on maintenance charges will be applicable.

TDS Section 194C: TDS Applicability

Well, according to section 194C of the income tax act, TDS can only be deducted either in “work-related contracts” or in “Labour related contracts”. However, TDS can’t be applied or deducted for the standalone sale of goods or the standalone supply of goods in any circumstances. Below is the applicability of TDS under section 194C for better transparency.

  • According to section 6 of the income tax, the contractor or the sub-contractor must be an Indian resident.
  • The contract must be a work-related or labor-related contract for providing any services or supplying any materials or manpower. Even in case of any maintenance work, TDS on repair and maintenance charges shall be applicable for the deduction. 
  • The contract should be in written format. However, in some cases, they can be made verbally as well.
  • According to section 194C, if a single payment to a contractor is above Rs. 30000, TDS can be deducted.
  • In case if a single payment made to the contractor doesn’t exceed Rs. 30000 but multiple payments to the same contractor exceeds Rs.100000 in the same financial year, TDS shall be applicable to be deducted.

TDS Section 194C: TDS Non-Applicability

Well, there are certain scenarios in section 194C where TDS won’t be applicable to be deducted. Below are the conditions you may check out for sure.

  • If the job is not a contract, TDS shall not be deducted from the source payments instead of a standalone sale of goods or services.
  • If the total accrued turnover of the recipient (Who is paying for materials or services) does not surpass Rs.1 crore (In the case of a business person) or Rs. 50 Lakhs (for professionals) for the last financial year, the TDS to the payee will not be applicable as per the provision of the 44AB clause of the income tax act.

TDS Section 194C: TDS Rate 

According to section 194C of the income tax, the TDS rate is furnished below depending upon circumstances. 

In Case the Contractor is having PAN

  • Suppose the contractor is an individual or HUF (Hindu Undivided Families). In that case, a flat rate of 1% TDS shall be applicable to be deducted from the source payments.
  • Suppose the contractor is owing to a firm instead of an individual or HUF. In that case, a flat rate of 2% TDS shall be applicable to be deducted from the source payments.

In Case the Contractor is Not having PAN

A flat rate of 20% TDS shall be applicable to be deducted from the source payments made to the contractors. Here in this scenario, the rate of TDS shall be the same for all the payees.

Conclusion

Now you are better ready to deal with the TDS under section 194C of the income tax act. However, in 2020, some changes were made in section 194C due to the worldwide pandemic situation. But now, the temporary relaxations were removed and will be applicable as it was before the pandemic.