Section 194C · TDS on payment to contractors
Paying a contractor? Cut TDS at 1% or 2%.
- Rate — Indiv/HUF
- 1%
- Rate — Others
- 2%
- Single-bill trigger
- ₹30,000
- Annual trigger
- ₹1,00,000
In plain English
Anytime a business pays a contractor for work — labour, advertising, catering, transport, customised manufacturing — it must deduct TDS at 1% (if the payee is an individual or HUF) or 2% (everyone else). Triggered by a single bill above ₹30,000 or yearly payments above ₹1,00,000.
| Meaning | Number |
|---|---|
| Rate — Indiv/HUF | 1% |
| Rate — Others | 2% |
| Single-bill trigger | ₹30,000 |
| Annual trigger | ₹1,00,000 |
What this section covers
Section 194C applies to payments by a specified person (companies, firms, government, trusts above the audit threshold, individuals/HUFs liable to audit, etc.) to a resident contractor for carrying out any work — including supply of labour, advertising, broadcasting, catering, manufacture or supply of a product to customer specifications, and transport. TDS is 1% if the payee is an individual or HUF and 2% otherwise. Trigger: a single bill exceeding ₹30,000 or aggregate payments in the financial year exceeding ₹1,00,000. Transport contractors owning ten or fewer goods carriages are exempt on furnishing of PAN and a declaration.
Read the legal text
“Any person responsible for paying any sum to any resident… for carrying out any work… in pursuance of a contract between the contractor and a specified person shall… deduct an amount equal to— (i) one per cent where the payment is being made… to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made… to a person other than an individual or a Hindu undivided family…”
Old Act vs New Act
| Aspect | Act, 1961 | Act, 2025 |
|---|---|---|
| Section | 194C | 393 |
| Topic | TDS on payment to contractors | |
| Verdict | Consolidated into Section 393 — mapping reviewed | |
| Notes | The Income Tax Department transition FAQ expressly gives old Section 194C → Section 393 as an example. Exact table row, rates and thresholds remain in the detailed review queue. | |
Common confusion
194C applies to a 'contract for work', not to a 'contract for sale'. Manufacture using material purchased from a person other than the customer is not covered. Composite contracts may need apportionment.
Who should know this
Related sections
Based on the official Income-tax Act, 1961 and the published Income-tax Act, 2025 as available on the Income Tax Department website. Always verify against the published Act and consult a qualified professional.
What was checked
194C → 393(1): Mapping to consolidated TDS section 393 only; exact table row, rates and thresholds not re-checked in this pass. FAQs on Interplay and Transition from the Income-tax Act, 1961 to the Income-tax Act, 2025
Related official updates