Calculate TDS deduction on contractor, sub-contractor, professional, and rent payments — per Income Tax Act Sections 194C, 194J, and 194I.
TDS non-compliance creates two distinct financial risks: under-deduction results in the deductor being treated as an "assessee in default" under Section 201, liable for the TDS amount plus interest at 1%/1.5% per month; and late deposit of correctly-deducted TDS attracts separate interest and late filing fees under Section 234E. Both are entirely avoidable with correct rate application and timely deposit — but the most common contractor error is not tracking cumulative payments to the same vendor across the year, missing the point where the annual threshold is crossed.
A contractor pays a sub-contractor Rs 25,000 for a small repair job (below the Rs 30,000 single-payment threshold under 194C) and does not deduct TDS. Later in the same financial year, they pay the same sub-contractor another Rs 90,000 for additional work. Cumulative payments (Rs 115,000) now exceed the Rs 100,000 annual threshold — TDS becomes applicable, and depending on interpretation, may need to be deducted on the full cumulative amount, not just the payment that crossed the threshold.
Maintain a vendor-wise running total of payments within the financial year, checked before every payment — not just per-invoice. Verify PAN validity at vendor onboarding, not at the time of the first payment, since Section 206AA non-PAN rates are punitive (minimum 20%).
Finance teams maintain a vendor master with PAN status, TDS section classification, and a running cumulative-payment tracker updated with every invoice — flagging automatically when a vendor crosses the annual threshold rather than relying on manual per-invoice checks.
Rebota's vendor and billing module tracks cumulative payments per vendor automatically, flags TDS applicability the moment thresholds are crossed, and maintains PAN status against each vendor record — reducing the manual tracking that causes most TDS compliance gaps.
