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CA Intermediate · Taxation · Tax Deduction or Collection at Source and Advance Tax

Vikas Constructions LLP engages Delta Fabricators, a partnership firm and a resident contractor, for works in tax year 2026-27. Delta raises four bills on the LLP and all are paid on credit or payment in this order: Rs 25,000, Rs 28,000, Rs 29,000 and Rs 24,000. No single bill exceeds Rs 30,000. Assuming the contractor has no lower-deduction certificate, what is the TDS to be deducted when the fourth bill is credited?

The TDS is Rs 2,120. Although no single bill exceeds Rs 30,000, the yearly total of Rs 1,06,000 crosses Rs 1,00,000. Tax is then deducted on the entire amount at 2%, the rate for a firm contractor, at the time of the fourth credit.

  1. ANil, as no single payment exceeds Rs 30,000
  2. BRs 480
  3. CRs 1,060
  4. DRs 2,120Correct

Explanation

The aggregate payments in the year are 25,000 + 28,000 + 29,000 + 24,000 = Rs 1,06,000, which exceeds the Rs 1,00,000 annual limit. TDS therefore becomes applicable once the aggregate crosses the limit, and it is deducted on the whole aggregate, including the earlier bills. The payee is a firm, so the rate is 2%. TDS = 2% x 1,06,000 = Rs 2,120. Rs 1,060 wrongly uses the 1% rate for individuals or HUFs.

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