Correct Answer - Option 4 : 1 percent
According to the Section 194C of the Income Tax Act, any individual making a fee to a residential individual, who carries out 'work' as a contract between the 'specified individual' and the 'resident contractor,' is obliged and required to deduct TDS (Tax Deducted At Source).
NOTE: Additionally, it is specified here that the term 'contract' includes 'sub-contract.
TIME OF DEDUCTION UNDER SECTION 194C
If the deduction of TDS is to be done as per the provisions of Section 194C of the Income Tax Act, then the deductor must do it at the following time:
- At the time of credit of sum to the contractor’s account
- At the time of the payment in cheque or cash or any other mode.
Section 194C provides for deduction of tax at source from payments made to resident contractors and sub-contractors. For the previous year 2019-20, the rate of TDS under section 194C on payments to contractors will be 1 percent where the payee (payee) is an individual or HUF.