TDS Rate For Contractor /Sub Contractor.

Tax Deducted at Source (TDS) is a system of collecting income tax where the payer of the income deducts a certain percentage of tax at the time of making the payment. The deducted tax is then deposited with the government on behalf of the payee.

TDS is applicable on various types of payments, including payments to contractors. Under Section 194C of the Income Tax Act, 1961, TDS is required to be deducted on payments made to contractors or sub-contractors if the following conditions are met:

The payment is for the execution of a work contract or supply of services.
The amount credited or paid to the contractor or sub-contractor exceeds Rs. 30,000 in a single payment or Rs. 1,00,000 in aggregate during a financial year.

The TDS rate on payments to contractors is 1% for individuals or Hindu Undivided Families (HUFs) and 2% for all other entities. If the contractor does not provide a valid PAN, the TDS rate is 20%.

The following payments to contractors are exempt from TDS:
- Payments made for the purchase of goods and materials.
- Payments made to government contractors.
- Payments made to contractors who have a lower tax deduction rate under a tax treaty between India and another country.
- Payments made to contractors who have submitted Form 15G or 15H, as the case may be, declaring that they have no tax liability or that their tax liability is less than the TDS rate.
- Payments made to the government or any local authority.
- Payments made to a contractor who is a non-resident Indian (NRI).

Verify the PAN of the contractor.
Calculate the TDS amount payable by applying the applicable TDS rate to the gross payment.
Deduct the TDS amount from the payment to the contractor.
Deposit the deducted TDS with the government within 30 days from the date of deduction.
Issue TDS certificate to the contractor in Form 16C.

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Know More about TDS Filling & Registration

If you have any questions or need assistance with TDS compliance, you should consult with a tax Expert.