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TDS on Contractor Payments (Section 194C)
Payments to a contractor or sub-contractor attract TDS under Section 194C: 1% if the contractor is an individual or HUF, and 2% for companies, firms and others. TDS applies when a single payment exceeds ₹30,000 or the total for the year exceeds ₹1,00,000.
Quick answer (FY 2025-26 and FY 2026-27)
- TDS rate
- 1% / 2%
- Threshold
- ₹30,000 per payment or ₹1 lakh a year
TDS on contractor payments: rate chart
| Payment | Section (1961 Act) | New section (2025 Act) | Rate | Threshold |
|---|---|---|---|---|
| Contract work, contractor is an individual or HUF | 194C | 393(1), Sl. No. 6(i) | 1% | ₹30,000 single / ₹1 lakh a year |
| Contract work, contractor is a company, firm, LLP or other | 194C | 393(1), Sl. No. 6(i) | 2% | ₹30,000 single / ₹1 lakh a year |
| Contract work paid by an individual or HUF not under audit | 194M | 393(1) | 2% | ₹50 lakh a year |
What counts as contract work
Work includes advertising, broadcasting, carriage of goods or passengers (other than by railways), catering, and manufacturing or supplying a product to the customer's specification using material bought from the customer. Civil construction, repairs, housekeeping and labour contracts are common examples.
A transporter who owns ten or fewer goods carriages at any time in the year and gives a declaration with PAN is exempt from TDS.
How the two limits work
Both limits are checked separately. A single bill above ₹30,000 attracts TDS even if the yearly total stays below ₹1 lakh. Once the yearly total crosses ₹1 lakh, TDS applies to all payments for the year, including earlier small bills.
Where GST is shown separately on the bill, TDS is on the amount excluding GST.
TDS on contractor payments calculator
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Below ₹30,000 a payment, TDS still applies if the year's total payments to the contractor exceed ₹1,00,000.
Frequently Asked Questions
What is the TDS rate on contractor payments?
What is the 194C threshold?
Is TDS deducted on transport payments?
Do individuals deduct TDS on payments to contractors?
Is TDS on contractor payments deducted on GST?
What is the new section for 194C?
What is the due date for depositing TDS on contractor payments?
What happens if TDS on contractor payments is not deducted or deposited on time?
Which TDS return and certificate apply to TDS on contractor payments?
How can the payee check the TDS deducted?
Did the Income-tax Act 2025 change TDS rates from April 2026?
New section references are to the Income-tax Act, 2025, in force from 1 April 2026. Verify the table serial number against the official text before quoting it in a return or notice reply.