TDS on compensation paid for cancellation of an agreement, Income Tax

[tailor jaffrulla khan]

Whether TDS is applicable on compensation paid for cancellation of an agreement to sell.

Posts / Replies

[Surender Gupta]

It is the nature of transaction which enables to determine the applicability of TDS provisions. Why the contract was cancelled. What is the overall nature of cancelled contract. Is it in the nature of works contract. How is liable to pay the compensation etc. etc. As such there is category which specifically stipulates the deduction of TDS on compensation. But, if such compensation is in the nature of category on which TDS is liable to be deducted, you need to deduct TDS.