09 July 2024
In the context of an electronics item manufacturer in India, Tax Deducted at Source (TDS) applies when certain payments are made to vendors, contractors, or service providers. The relevant section under the Income Tax Act, 1961 that governs TDS is Section 194C.
Here are the key points regarding TDS applicability for an electronics item manufacturer:
1. **Nature of Payments**: TDS under Section 194C applies to payments made to contractors/sub-contractors for carrying out any work (including supply of labor for work), or for providing services related to any work.
2. **Threshold**: TDS is applicable if the aggregate amount paid or credited to a contractor or subcontractor during the financial year exceeds Rs. 30,000.
3. **Rate of TDS**: The current rate of TDS under Section 194C for payments made to an individual or a Hindu Undivided Family (HUF) is 1% if they provide their PAN (Permanent Account Number). For payments to others, including companies, the TDS rate is 2%.
4. **Contractual Arrangements**: It's crucial for an electronics manufacturer to ensure that payments made to contractors or service providers are correctly classified under Section 194C. The TDS should be deducted at the time of credit of such sum to the account of the contractor or at the time of payment, whichever is earlier.
5. **Compliance**: The electronics manufacturer needs to deduct TDS, deposit it to the government treasury within the prescribed time, file TDS returns, and issue TDS certificates to the deductees (contractors/sub-contractors).
It's important to consult with a tax advisor or chartered accountant to ensure compliance with TDS provisions and to correctly interpret the specifics based on individual circumstances and transactions.
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