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.