Reimbursement of TDS, Income Tax

[Siraj Shaikh]

There is a labour contractor charging Rs. 12,000 per month for some service. The company has agreed to bear the TDS amount. The Bill submitted by the contractor is 12, 240 inclusive of TDS. Hence, the company deducts 244.80 from 12,240 and pays the net. IS IT OK from Income Tax Point of View.

Posts / Replies

[CS Swati Dodhi]

Yes, the treatment is correct

The tax borne by company becomes income of the contractor,thus tax deducted at 2% of 12240 is correct

Read section 195A if required.

[Narender Singh Negi]

Labour contractor services is chargable to TDS @2% u/s  194C and TDS will be deducted on credit or paid with ever is earlier. So it is OK as per income tax act but contractor income will be increased by Rs.240/- that will have to justify to the department in the case of scrutiny.  But at the time of deduction contractor have to provide PAN to the company against the deduction of Rs.244.80.

[Siraj Shaikh]

Thanks Swati and Narendra...