Friday, August 20, 2010

TDS on Advance

Question

Advance pymt made to Builder for residential flat - Do we need to deduct TDS on such pymt as per IT Act, India? Payment made by Indian Company to a property developer

Answer

Yes tax needs to be deducted on the Builder as it is a payment to a contractor as defined under section 194C. Section 194C(1) states that tax should be deducted either at the time of credit of such amount or payment of such amount (either by cash or cheque) whichever is earlier. So in this case as you make payment (advance) before crediting the amount, you are liable to deduct TDS under section 194C for the advance

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