According to Indian tax laws, Tax Deducted at Source (TDS) on payments to contractors is mandatory under Section 194C of the Income Tax Act. But the timing of when to deduct TDS is crucial. Here are the key things to consider:
1. 💶Advance Payments: TDS is required to be deducted at the time of payment or at the time of credit, whichever is earlier. So, ideally, TDS should have been deducted at the time of making the advance payment in FY 2022-23.
2. 🕘Financial Year: Considering you made the final payment in FY 2023-24 and deducted TDS on the whole amount, this could potentially lead to a mismatch in the TDS compliance for both the years.
3. ⚰️✅Correct Procedure: The correct procedure would have been to deduct TDS on the advance payment in FY 2022-23 and then deduct TDS on the remaining payment in FY 2023-24.
💼Here are the steps to correct the situation:
Step 1: Review the payment history and identify the TDS which should have been deducted in FY 2022-23.
Step 2: Deposit the TDS for FY 2022-23 immediately with the correct interest as per the provisions of the Income Tax Act.
Step 3: Amend the TDS return for FY 2022-23 to accommodate the changes.
Step 4: Review the TDS deducted in FY 2023-24 and adjust the excess TDS (if any) deducted in the next payment to the contractor or claim a refund in the TDS return.
Please consult your tax advisor or CA to ensure accurate compliance with the tax laws. Remember, non-compliance can lead to penalties and interest charges. 🤓🤘