contract of work Vs. contract of sale & tds on rent
jimi patel
(Querist) 06 January 2011
This query is : Resolved
1>
we have a client who entered with an agreement with contractor to laying pipelines for home connection for gas distribution. In contract they mentioned the particular rate for one connection which incusive of both material and labour.they did not mention seprately labour rate and material rate. i.e 3800 for one connection incuding both labour and material.But contractor raised bill seprately for labour and material. i.e 1900 for labour and 1900 for material. Now i have query that on which amt we have to deduct the tax i.e on 3800 0r 0n 1900 for labor portion only. please reply urgent.
2>
i have a client who has taken certain buildings on rent for 35000 monthly rent. annualy 420000 but he deduct the tds only after payment exceeds 180000 then he deduct tax on whole amt which was not deducted upto 180000 pymt. Is it correct? I think rather he should deducted tds from the first payments onwards ? whether i am correct or not? please reply urgent.
R.Ramachandran
(Expert) 06 January 2011
According to 194C (3) of I. T. Act
Where any sum is paid or credited for “carrying out any work” mentioned in sub-clause (e) of clause (iv) of Explanation, tax shall be deducted at source—
(i) On the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or
(ii)On the whole of the invoice value, if the value of material is not mentioned separately in the invoice.
Thus, in your case, since the contractor is showing separately the material cost and labour cost, TDS is to be effected only on the labour cost and not material cost.
First Proviso to Section 194I of the I.T. Act stated that "no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed one hundred and eighty thousand rupees"
The 1.8 lakh is only to determine whether TDS is to be effected or not. Once the rent paid or payable exceeds Rs. 1.8 lakhs in a year, then TDS is to be effected on the whole amount not on the amount which exceeds Rs. 1.8 L.
