Understanding of 2% TDS deduction under Income Tax Section 51 when the contract/procurement value exceeds ₹2,50,000 (Rs. 2.5 Lakhs)

📋 Understanding TDS Deduction under Income Tax Section 51

This bulletin outlines the key provisions for deducting Tax Deducted at Source (TDS) on payments made to suppliers for goods or services, as mandated under Section 51 of the Income Tax Act.

Official Reference: For complete details, please refer to the Income Tax Act, 1961 - Section 51 on the official Income Tax India website.

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📍 Who is Liable to Deduct TDS (The Deductor)?

• 🧾 Any specified person (e.g., government agencies, certain companies, etc.) making payment for taxable goods or services is liable to deduct TDS.

📍 Threshold Limit for TDS Deduction

• ⚖️ TDS is applicable only when the total value of the supply under a single contract/procurement exceeds ₹2,50,000 (Rs. 2.5 Lakhs).
• Payments for contracts valued below this amount are not subject to TDS under this section.

📍 Applicable TDS Rates

🏠 For Intrastate Supplies (Within the same state):

• Rate: 2%
• Governing Law: Section 51 of the CGST/SGST Act.
• *(This 2% is typically 1% CGST + 1% SGST/UTGST).*

🌐 For Interstate Supplies (From one state to another):

• Rate: 2%
• Governing Law: Section 20 of the IGST Act.
• (This 2% is under the Integrated GST Act).

Read more above TDS https://gst.kar.nic.in/Documents/FAQ/FAQsonTDS.pdf

Implementation of deduction of 2% TDS on Taxable value exceeds 2.5lakh w.e.f 01.10.2018 vide Department of Revene - CBITC letter cited below