Introduction:

Any tax paid to an contractor is subject to tax withheld at source (TDS) under Section 194C. In this section, we examine the specific provisions of the TDS relating to advertising, including deductions from fees paid to advertising agencies in industries such as newspapers, magazines, publications , advertising, advertising, promotions, etc. Go into details.

Section 194C:

Section 194C of the Income Tax Act, provides for deduction of tax at source (TDS) in respect of payments to contractors, which provides guidelines for TDS in respect of a wide range of service contracts is clearly visible. Let us delve into breaking down the main elements of Section 194C.

Applicability of Section 194C:

This category applies when a person or entity has an obligation to provide funds to resident employees, usually for employment purposes, including staffing arrangements Parties to this category include:

• Central Government or any State Government
• local authority
• company
• Any corporation established or subordinated by a central, state, or Provisional Act…
• cooperative society
• Trusts
• Universities or deemed universities
• Firms
• A society registered under the Society Registration Act, 1980, or any relevant legislations applicable in India.

“Work” under Section 194C:

As per Section 194C, “work” is defined as follows.

• Advertising.
• Broadcasting, telecasting and programming all fall under this category.
• It includes the transportation of goods and passengers by certain modes other than rail.
• Catering
• The manufacture or supply of a product based on the specific requirements or specifications of a customer, using materials purchased from that customer or its counterpart as defined in section 40A(2), excludes the manufacture or supply of a product shall be provided to satisfy the specification of the customer by including the material received from another party.

Sub-Contractor under Section 194C:

The term “subcontractor” means any person or entity:

• Who engages in a contractual agreement with the contractor to perform or
• for the supply of labor for the execution of a project carried out wholly or in part by the Contractor under an agreement with any government concerned, or
• To furnish to any of the authorities specified in this section all or part of the labor which the Contractor is obliged to furnish under the terms of his contract

TDS on Payments to Sub-Contractors:

Section 194C requires any company responsible for distribution of payments to a subcontractor (other than individuals and unclassified Hindu families) to deduct TDS at the prescribed rate:

• 1% of the total sum available at the time the sum are transferred to the subcontractor’s account.
• 1% on payment, whether in cash, by check, draft, or otherwise, whichever comes first.
• it’s worth mentioning that, for transactions between May 14, 2020 and March 31, 2021, the TDS rate was reduced to 0.75%.

Conditions made to Sub-contractors for Payment :

• The amount is allocated to a sub-contractor who qualifies as a resident as defined in Section 6, 1961 of the Income Tax Act.
• Contractor  is a resident and paying employee, without individual or Hindu Undivided Family (HUF).
• Payments are paid for a service, including the provision of labour.
• The consideration for the paid contract shall not be less than Rs. 30,000

Exceptions to TDS Requirements for Contractor Payments:

• When the goods are supplied by the government, the question arises as to whether the deduction should be calculated on the basis of the gross payment to the contractor or on the gross payment, which is the gross payment without deduction any
• If the contractor is in the business of constructing a structure or dam, and the government or other designated agency promises to supply some or all of the materials needed at a fixed price, they will be based on a discount of the whole, and no changes will be taken into account
• If the contractor’s responsibility is to supply labor only, with the government or other designated agency holding the remaining supplies, the amount due by the contractor for the contract shall be paid employees or assigned services only, where government or other designated persons are not included in the assignment of the debt items. Consequently, the rate of TDS payable by the Government or specified agencies to an employee will be either 2% or 1% of the total payment, or, alternatively, a flat payment depending on the terms of the contract on but from 14th May For ongoing transactions up to 31 March, the rate is adjusted to either 1.5% or 0.75%.

TDS Compliance Guidelines for Contractor Payments:

Follow these important steps to ensure compliance with TDS rules for contractor payments:

• Make sure the contractor provides his PAN, as it affects the TDS rate. Tell them about the higher TDS rate applicable where they do not have PAN.
• Determine the amount of TDS by applying the appropriate amount to the payments made to contractors.
• Deduct the calculated TDS amount from the amount paid to the contractors and remit the deduction to the government.
• As a taxpayer, it is important to file TDS returns with the Revenue Department, including details of TDS deductions and payments to processors
• Issue the TDS certificates (Form 16A) to the contractors, referring to the specifics of the TDS deduction.

Final Word:

The  guide provides detailed insights into section 194C by specifying TDS procedures for advertising. If the amount paid to the contractor exceeds Rs. 30,000, in accordance with the aforesaid guidelines. Also, find out the applicable tax rates, exemptions, calculation methods, and more information.