TDS on Secured Advance

[CS Sonia Sehgal]

Dear Members,

 

Please resolve the following query:

 

ABC Pvt. Ltd. entered into the contract with Mr. A/XYZ Pvt. Ltd. ABC Pvt. Ltd. gave the advance to its contractor for performing the work against Bank Guarantee of the same amount. Now, shall ABC Pvt. Ltd. liable to deduct TDS on the advance given to contractor which is secured with BG? 

 

Please treat it urgent.

 

Regards

CS Sonia Sehgal

[chakri hegde]

Dear Sonia,

Even though, there is no clarification or circular in this regard, if we go by the section 194 C of the Income Tax Act, 1961, it says that ANY SUM PAID, that means irrespective of the fact whether it is an advance payment or otherwise, deduction of TDS will be applicable and it fall under the category for deduction tax, the tax has to deducted. Kindly go through section 194C.

So, ABC Pvt. Ltd. can deduct TDS on the advance given to contractor which is secured with BG.

Please correct if I am wrong in my interpretation.

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With Best Wishes
Chakri G Hegde
Nissin Foods India Ltd.
Bangalore

[CS Sonia Sehgal]

Dear Sir,

 

Thanks a lot for your indeedful help.

 

Regards

[ajay kumar]

Dear,

 

There is no need to deduct the TDS on such Bank guarantee as there is no actual payment. The liability to deduct arise only when we actually make any payment. Bank guarantee is not the actual payment but only assurance that the paymnet shall be made to you. So please be assure no tds is required.

 

thanks

On Fri, Nov 13, 2009 at 9:37 AM, chakri hegde <chakri...@gmail.com> wrote:

[CS Sonia Sehgal]

Dear Ajay,

 

TDS is not to be deducted on BG. My query is whether TDS is required to be deducted on advance payment to contractor which is secured with BG; means in lieu of advance payment contractor has given the BG to contractee company?

 

Regards

CS Sonia Sehgal

[N D Shreenivaas]

Any amount paid or credit, whichever is earlier, is the criteria for TDS. whatever the name it is called.

N.D.Shreenivaas.BBM.,M.Com.,PGDHRM.,
Bhavani Associates
Income-tax e-Return Intermediary
# 24, 8th Main, 3rd Cross,
Saraswathipuram
MYSORE - 570009
Ph:08212546655
9845120429
in...@bhavaniassociates.com
www.bhavaniassociates.com

[ajay kumar]

Ok Dear,

 

You have to deduct TDS as you are giving the paymnet in lieu of contract. Your intention at the time of paymnet is fully genuine as a contract payment. Hence you have to mandatory deduct tds.