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of <h1>Income Tax Act: 2% TDS on Payments to Munshis in Bidi Manufacturing u/s 194C Clarified by CBDT.</h1> Under Section 194C of the Income-tax Act, 1961, entities must deduct 2% income tax from payments to contractors or sub-contractors. In the bidi manufacturing industry, manufacturers provide raw materials to intermediaries, known as munshis, who distribute them to workers. Munshis collect finished products and pay workers. The Central Board of Direct Taxes clarifies that munshis are considered contractors under the Bidi and Cigar Workers (Condition of Employment) Act, 1966. Therefore, Section 194C applies to payments made to munshis, as the law encompasses both written and oral contracts, making munshis liable for tax deductions at source.
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