Examine TDS implications in case of following transactions, briefly explaining provisions involved; state the rate and amount to be deducted,…

CA Intermediate · Taxation · MTP · January 2026
Examine TDS implications in case of following transactions, briefly explaining provisions involved; state the rate and amount to be deducted, assuming that the deductees are residents and having a PAN which they have duly furnished to the respective deductors. Rohit, a resident individual in India who does not have any income from business or profession, made payments of 10 lakhs in January 2025,25 lakhs in February 2025, and 25 lakhs in March 2025 to Suresh, a contractor, towards the reconstruction of his residential house.ABC Pvt. Ltd. made a payment of 2,00,000 to Rajesh, an individual transporter who owned 6 goods carriages throughout the P.Y. 2024-25. Rajesh did not furnish his PAN to ABC Pvt. Ltd.

Suggested Answer and Working Notes:

On payments made to contractor Tax is deductible @2% under section 194M, since payments to Mr. Suresh, a contractor, for reconstruction of his residential house exceeds 50lakhs in aggregate during the F.Y.2024-25. Amount of tax to be deducted = 2% of 60lakhs = 1,20,000 Payment to transporter who has not furnished PAN Under section 194C, no tax is deductible in respect of payments to a transporter, who owns ten or less goods carriages at any time during the year and furnishes a declaration to that effect along with his PAN to the person paying or crediting such sum. However, in this case, this exemption from TDS would not be available, since Rajesh has not furnished his PAN to ABC Pvt. Ltd. As per section 206AA, due to non-furnishing of PAN, tax would be deductible at a higher rate of 20% and not @1% provided under section 194C. Amount of tax to be deducted = 2,00,000 x 20% = 40,000

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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