Applicability of TDS

Dear all,

Greetings from CCDS,Bankura. We are a registered society working deep in the forest fringe villages for upliftment of standard of livings of poor villagers,mostly SC & STs. We have got registration u/s12A of I T Act 1961. We work for education,health.rural development so on. Recently we have got a proposal from a funding agency to take up construction of Girls hostel deep into forest village. Since we are a NPO ,under the said registration,we are not ready to accept TDS while getting progressive payment. Unless this point is made clear we are not going to sign MOU with them. However, they are ready to accept our request provided we submit them detailed Govt. order in this respect which we need at the moment.

Can we get help regarding this respect.
Thanking you,
S P Ghosh.

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7 Responses to Applicability of TDS

  1. Soma Satry says:

    Dear Ghoshbabu,

    Greetings from CWS!

    From the content of the mail, I understand that you have received a grant for construction of hostel and that the funds will be remitted to your account upon signing of the MoU. Please understand that the registration under section 12A provides exemption from tax to NPOs on the grants received by them.

    So far as the TDS is concerned, CCDS will have to deduct the same for the contracts entered into, during the course of the construction activity. The quantum or percentage of TDS will depend on the kind of contract you enter with the potential vendors involved in the construction activity.

    Moreover, please note that CCDS will have to have registration for TAN for being eligible to deduct the TDS as per the norms prescribed by IT Act 1961.

    Thanks and regards,

    B V Soma Sastry

    • Chhendapathar Community Development Society,Bankura, Pin-722162 says:

      Dear B V Soma Sastry,

      Let me please explain again. The funding agency want us to execute the work for construction of Girls hostels, on their behalf,in the forest fringe village. They propose to release payment in stages, to be decided,on actual execution of the job in stages. We want exemption of TDS in each stages of payment released as we are a Society registered u/s 12A of the IT Act 1951.

      Thanks and regards,

      S P Ghosh

      • Soma Sastry says:

        Dear Mr. Ghosh,

        Greetings from Hyderabad!

        1. As I can understand, the funding agency is outsourcing the job to CCDS.
        2. Do you mean to say that the funding agency will deduct TDS and release funds to you? You need exemption from that TDS.
        3. If that is the case, as suggested by others, you may have to approach the IT department for exemption. This would be a tedious process and honestly will not be an easy thing to achieve.

        I hope that the things have been understood correctly by me. If there is confusion we can speak over phone (9959999802)

        Thanks and regards,

        B V Soma Sastry

        • Chhendapathar Community Development Society,Bankura, Pin-722162 says:

          Dear B V Soma Sastry,
          In the mean time I have been told by one Chartered Accountant that there is a provision to make application to the IT Dept through form no 13 seeking exemption of TDS.
          Please let me know if you have got such experience.
          Thanks and regards,

          S P Ghosh

  2. Sriraman says:

    Dear SP Ghosh

    One option, of course, is what Venkat has suggested, which is to apply to the IT department, seeking approval for non-deduction of TDS. The fundamental assumption here, however, is that you are accepting that TDS is applicable on such payments and, given the special status of your organisation, you seek approval from IT for a lower or nil deduction of taxes from your payment. If you are not in agreement with this, then you need to go back to terms of the MoU or agreement.

    If the agreement is designed as as “grant agreement”, it is outside the purview of taxes, be it, TDS or Service Tax. If the agreement is payment for a “contractual obligation”, say for e.g., construction of a girls hostel, TDS will be certainly applicable. This is irrespective of 12A status of your organisation.

    There is no general exemption under the IT Act from TDS for all 12A registered entities. However, if you are a 12A registered entity, you have the option of work around the nature of the payment and try to receive it as a “grant” rather than payment for a “contractual” engagement.

    Hope this is useful

    Best regards


  3. venkat Raidu says:

    Approach IT department and get an exemption certificate for NIL deduction of TDS on the amount of money you would be receiving under this contract.

    Venkat Raidu

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