The Central Board of Direct Taxes (CBDT) has made it clear that tax need not be deducted at source on the service tax component on payments made/due to a resident payee.

This will be allowed only in cases where the service tax component comprised in the amount payable to a resident is indicated separately in the contract between the payer and the payee, the CBDT has said in a circular.

In such situation, tax has to be deducted on the amount paid/payable without including the service tax component.