Mr. Rajiv is a salaried individual working with a MNC in Jaipur, Rajasthan. He is staying in his ancestral house which was built by his grandfather in 1975. During the P. Y. 2020-21, he decided to reconstruct his house f

CS Professional · Advanced Tax Laws · PYQS · December 2021
Mr. Rajiv is a salaried individual working with a MNC in Jaipur, Rajasthan. He is staying in his ancestral house which was built by his grandfather in 1975. During the P. Y. 2020-21, he decided to reconstruct his house for which he gave an all-inclusive contract to Mr. P. The overall contract price was ₹47,50,000. The contract was entered into Oct., 2020 and Mr. P handed over the reconstructed house back to Mr. Rajiv on 01.02.2021. Due to poor condition of house prior to reconstruction, Rajiv decided to shift temporarily in a rented furnished apartment from 01.04.2020 onwards at a montly rent of ₹60,000 per month. The landlord of Mr. Rajiv and Mr. P. (Contractor) does not have PAN. (b) State whether Tax is to be deducted by Rajiv from payment made to Mr. P. (Contractor). If yes, determine the amount of tax to be deducted by Rajiv during the P.Y. 2020-21.

Answer & Explanation:

As per provision of section 194M of the Income tax Act, 1961, any person, being an individual or a Hindu undivided family, is required to deduct TDS on payment made to a resident Contractor @ 5% of the amount paid to such contractor. However, tax u/s 194M has to be deducted only if aggregate amount of sum paid to a resident during the P.Y. exceed ₹50,00,000. Since, the amount paid by Mr. Rajiv to Mr. P is less than ₹50,00,000 i.e. ₹47,50,000 only. Thus, no tax has to be deducted by Mr. Rajiv.

Topics: Income Tax

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