Section 194C- TDS on the payment of contractor

What is section 194C?

Section 194C states that if any person who are responsible to pay any sum to the any resident contractor for carrying out any work, in the pursuance of the contract between the contractors. The contractors could be like the local authority, any company, any trust, firm, university or etc.


Kind of works lies under section 194C is Catering, advertising, broadcasting and telecasting, manufacturing the goods according to the requirement like construction work and etc. there are also the sub-contractor under section 194C and as per the provision of income tax act any person who responsible for paying the sum to the any resident contractor then they have to first deduct the TDS on the payment to the any contractor or the sub-contractor.

But while paying the amount to the sub-contractor the contractor have to satisfy these conditions.

• Payment should be made by the individual contractor and should not being the individual or HUF
• Payment can be made for any work even for supply of labor as well.
• The consideration of the amount should not be lesser than the amount of 30,000.
• The sum-contractor should be the resident within the meaning of section 6 of the income tax act 1961.

These followings are the TDS rates: –

• 1% of TDS should be deducted on the payment if the contractor is resident individual or HUF but since 14/5/2020 to 31/3/2021 the rate has decreased to 0.75%.
• 2% of TDS should be deducted on the payment if the contractor is other than individual or HUF but since 14/5/2020 to 31/3/2021 the rate has decreased to 1.5%.
• Or if the PAN has not furnished of the deductee then the TDS rate will be 20%.

No TDS on the following cases: –

• Where amount credited or paid to a contractor or sub-contractor does not exceed Rs 30,000 in a single payment or 1, 00,000 in the aggregate during a financial year.
• Whenever payment has made to the transport contractor who owns 10 or less than carriage at any time during the financial year and gives a declaration to the deductor to this effect besides this, he provides the PAN as well.
• Payment by an individual or HUF to a resident contractor for personal purpose, even if the deductor is subject to audit of his account under section 44AB.

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