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194C
Section 194C TDS Rate FY 2026-27
TDS on payments to contractors and sub-contractors: rate, threshold, who deducts, and the new section number under the Income-tax Act 2025.
Quick answer
- TDS rate
- 1% / 2%
- Threshold
- ₹30,000 for a single payment, or ₹1,00,000 in aggregate during the year
- Old section (1961 Act)
- Section 194C
- New section (2025 Act, from 1 Apr 2026)
- Section 393(1), Table Sl. No. 6(i)
- Without PAN
- 20% if the contractor does not furnish a valid PAN.
194C TDS rate chart
| Nature of payment | Rate |
|---|---|
| Contractor is an individual or HUF | 1% |
| Contractor is a company, firm, LLP or any other person | 2% |
Who deducts and when
Who has to deduct
Any person other than an individual or HUF, plus individuals and HUFs whose accounts were required to be audited in the preceding year, when paying a resident contractor for carrying out work under a contract.
When to deduct
At the time of credit to the contractor's account or payment, whichever is earlier.
Points to remember
- "Work" includes advertising, broadcasting and telecasting, carriage of goods or passengers by any mode other than railways, catering, and manufacturing or supplying a product to the customer's specification using material bought from the customer.
- No TDS on payments to a transporter who owns ten or fewer goods carriages at any time in the year and gives a declaration with PAN.
- If GST is shown separately on the invoice, TDS is generally deducted on the amount excluding GST (CBDT Circular No. 23/2017).
- Both limits are tested separately: one bill above ₹30,000 triggers TDS even if the yearly total is below ₹1,00,000, and the yearly total crossing ₹1,00,000 triggers TDS on all payments including earlier small bills.
Worked example
A company pays an individual civil contractor ₹1,50,000 (excluding GST) for repair work.
TDS at 1% = ₹1,500.
Section 194C TDS calculator
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Applicable rate –
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Frequently Asked Questions
What is the TDS rate under Section 194C?
1% for contractor is an individual or HUF; 2% for contractor is a company, firm, LLP or any other person.
What is the threshold limit for TDS under 194C?
₹30,000 for a single payment, or ₹1,00,000 in aggregate during the year.
What is the new section for 194C under the Income-tax Act 2025?
From 1 April 2026 the Income-tax Act 2025 replaces the 1961 Act. TDS on payments to contractors and sub-contractors (old Section 194C) is now covered by Section 393(1), Table Sl. No. 6(i). The rate and threshold carried over unchanged.
Who has to deduct TDS under 194C?
Any person other than an individual or HUF, plus individuals and HUFs whose accounts were required to be audited in the preceding year, when paying a resident contractor for carrying out work under a contract.
When should TDS under 194C be deducted?
At the time of credit to the contractor's account or payment, whichever is earlier.
What is the TDS rate under 194C if PAN is not available?
20% if the contractor does not furnish a valid PAN.
What is the due date for depositing TDS under 194C?
Generally by the 7th of the following month. For tax deducted in March, the due date is 30 April. Government deductors paying without a challan must deposit on the same day.
What happens if TDS under 194C is not deducted or deposited on time?
Interest is charged at 1% per month (or part of a month) from the date tax was deductible to the date it is deducted, and at 1.5% per month from deduction to deposit. Late filing fees and penalties can also apply, and for a business, 30% of the expense may be disallowed.
Is TDS under 194C deducted on the GST amount?
Generally no. Where the GST component is indicated separately in the contract or invoice, TDS is deducted on the value excluding GST, as clarified in CBDT Circular No. 23/2017.
Does 194C apply to transport charges?
Yes. Carriage of goods or passengers by any mode other than railways is "work". A transporter owning ten or fewer goods carriages who furnishes a declaration with PAN is exempt from TDS.
Section 393 table references are based on the Income-tax Act, 2025 as published. Verify the serial number against the official text before quoting it in a return or notice reply.
Other TDS sections
TDS on common payments
TDS on Rent
10% / 2%
TDS on Salary
Slab rates (average)
TDS on Purchase of Goods
0.1%
TDS on Property Purchase
1%
TDS on Sale of Property
1% (resident) / 12.5%+ (NRI)
TDS on Commission
2%
TDS on Professional Fees
10% / 2%
TDS on Contractor Payments
1% / 2%
TDS on Partners' Remuneration
10%
TDS on FD Interest
10%
TDS on GST (TDS under GST)
2% (1% CGST + 1% SGST, or 2% IGST)
TDS on Cash Withdrawal
2% (5% for non-filers above ₹1 crore)