Thursday, July 25News That Matters

No TDS on Service Tax portion of the bill


As per new CBDT circular 01/2014 dated 13 Jan 2014, tax shall be deducted at source under Chapter XVII-B of the Income Tax Act on the Amount paid / payable without including Service Tax, if such service tax is shown separately. This is applicable for amount payable to a resident whatever be the terms of agreement / contract between payer & payee.

No TDS is required to be deducted on Service tax portion of the bill.

In 2008, CBDT had issued Circular No 4/2008 dated 28-4-2008 wherein it was clarified that TDS under Section 194-I  should be deducted on rent paid / payable without including the service tax component.   But it was not extended to other TDS provisions.

Then in case of CIT(TDS) Jaipur Vs Rajasthan Urban Infrastructure (Income Tax Appeal No 235,222,238, 239 / 2011) dated 01-07-2013, the Rajasthan High Court ruled that if as per terms of agreement, the amount of service tax is paid separately and was not included in fees for professional / technical services, then no TDS is required to be made on service tax component u/s 194-J of Income Tax Act.

This circular is applicable for all TDS sections including 194J, 194IA etc and no TDS is deducted on Service Tax portion of the bill.

F.No 275/59/2012-IT(B)

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