1113. Co-operative societies included in the categories of persons who are to deduct tax at source from payments to contractors and sub-contractors under the section with effect from 1-4-1973

1. Reference is invited to this Ministry’s Circular No. 86 [F.No. 275/9/72-ITJ], dated 29-5-1972, No. 93 [F.No. 275/100/72-ITJ], dated 26-9-1972 and No. 95 [F.No. 275/9/72-ITJ], dated 15-11-1972 on the subject mentioned above.

2. Under section 194C, inserted in the 1961 Act, by the Finance Act, 1972, income-tax is deductible at source from income comprised in payments made by the Central Government or any State Government, local authorities, statutory corporations and compa­nies to contractors engaged for carrying out any work or for supplying labour for carrying out such work, at the rate of 2 per cent of such payments. Similarly, income-tax is deductible from payments made by contractors, other than individuals and Hindu undivided families, to sub-contractors at the rate of 1 per cent of the payment. Such deduction is to be made in all cases where the consideration for the contract or the sub-contract, as the case may be, exceeds Rs. 5,000.

3. The Finance Act, 1973 has amended section 194C so as to in­clude “co-operative societies” in the categories of persons who are required to deduct tax at source from payments made by them to contractors. Accordingly, income-tax will now be deductible from payments made by co-operative societies to contractors in respect of works and labour contracts, at the rate of 2 per cent of the payment; and the contractors, not being individuals or Hindu undivided families, obtaining contracts from co-operative societies will, in turn, be required to deduct tax at source from payments made by them to sub-contractors, at the rate of 1 per cent of the payment. These provisions will not apply to sums paid or credited by co-operative societies or by contractors to sub-contractors before June 1, 1973.

Circular : No. 114 [F.No. 275/61/73-ITJ], dated 21-6-1973.

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