TDS on Contract Payments [A.Y. 2018-19] 194C – Up to Date

There is a duty of payer to deduct TDS u/s 194C on making of payment/credited to contractor. Contractor includes a sub-contractor. In this article we will discuss about the TDS deduction and related procedure on payment to contractors & sub contractors.

The article is up to date with latest amendment as per finance act 2017.

Quick Summary for TDS on Contract Payment Under Section 194C

Person Responsible to Deduct Tax Specified person
Exemption Limit Rs. 30,000 for single payment or aggregate amount in the financial year does not exceed Rs. 1,00,000*
TDS Rates Single Transaction to an Individual or HUF 1%

Single Transaction to other than an individual or HUF 2%

In whole financial year to an Individual or HUF 1%

in Whole Financial year to other than Individual or HUF 2%

Time of Deduction of TDS At the time of payment or credit whichever is earlier
Time for Deposit of TDS Within one week from the last day of the month of tax deduction, For month of March, before 30th April.
Certificate of TDS Form 16A for each quarter is to be issued within 15 days from the due date for furnishing the statement of tax deducted at source under rule 31A i.e. on or before 15th August, 15th November, 15th February and 15th June
Quarterly Return of TDS In Form No.26Q on or before 31st July, 31st October and 31st January for the first three quarters and on or before 31st May for the last quarter.
AO’s Certificate for Deduction at Lower Rate or Non Deduction Yes, Application in Form No. 13 Appropriate Certificate to be issued by AO
Is Self Declaration by Payee for Non Deduction Admissible No

TDS Rates on Payment to Contractors

1% (where the payment is being made or credit is given to an individual or a HUF)

2% (where the payment is being made or credit is to be given to any other entity)

The rate will be NIL if the transporter quotes his PAN.

TDS shall be deducted @ 20% in case a deductee fails to furnish his Pan to the deductor (Sec. 206AA)

No surcharge, education cess and SHEC shall be added. Hence, TDS shall be deductible at basic rate.

Time of Deduction of TDS on Payment to Contractors

The payer will responsible to deduct TDS on contract payment at the time of payment or credit whichever is earlier.

Payment should be more than Rs. 30,000/- for one contract/each contract or Rs.1,00,000/-  (w.e.f. 1-6-2016) in total for all the contracts. The deduction will be made when the payment credited or paid.

When the amount exceeds Rs. 30,000 then the deduction will be made on earlier amount also. The section 194 C is applicable for resident contractor only. For non-resident the section 195 will be applicable.

Time Limit to Deposit of TDS

Where the tax is deducted by the officer of the Government:

  • on the same day where the tax is paid and
  • on or before 7 days from the end of the month in which the deduction is made.

In any other case,

  • on or before 7 days from the end of the month in which the deduction is made and
  • on or before 30th April, where the income or amount is credited or paid in the month of March.

Time Limit for Issue of Certificate of TDS and Form

The payer should issue form 16A within 15 days from the due date of furnishing the statement/return. So the following is the time limit to issue of Form 16A for payment to contractor including Sub-contractor.

  • 15th August
  • 15th November
  • 15th February
  • 15th June

TDS Returns/Statement for TDS on Contractors u/s 194C

The payer should submit TDS return/statement in form no. 26Q for the payment to contractor including sub-contractors on or before;

  • 31st July
  • 31st October
  • 31st January
  • 31st May

Who will deduct TDS?

On the above payment TDS will be deducted but by whom? The following persons will deduct TDS.

  • A state or central Government, local authority or corporation under the state or central Government
  • Company
  • Society/Co-operative society
  • Trust/Authority for development of areas
  • Foreign enterprises
  • University
  • Firm
  • Individuals or HUF or AOP or BOI

Individual/HUF/AOP/BOI who has gross receipt/Sale/Turnover

For business: more than Rs. 1 crore (w.e.f.1/4/2012, A.Y.2013-14 onwards) Rs. 60 Lakh for A.Y. 2012-13.

For profession: Rs. 25 Lakh (w.e.f.1/4/2012, A.Y.2013-14 onwards), Rs. 15 Lakh for A.Y. 2012-13

Other Important Points

Examples of work contracts

Bank charges, oral contracts, piece rate contracts, advertisement contract, broadcasting contracts, travel agents, airlines, clearing & forwarding contracts, courier agencies, catering contracts, Professional & technical services and other contracts.

No TDS deduction on Payment to Transporters if PAN furnished

If the operators furnish his PAN to the deductor then deductor should not deduct TDS. But deductor will give the valid ‘PAN’ detail in the ‘Quarterly returns of TDS’ of the deductees within the time limit to get the exemption. It will be done only in the case of transporters, who engaged in the business of plying, hiring or leasing goods carriages.

On which amount TDS has to be deducted?

TDS will be deducted on the amount credited or paid for the services used. However, in the case of manufacturing or product in which the services have involved then the amount to deduct TDS is only for service used, if it is mentioned in the invoice. However, if there is not a separate amount for service, then the TDS will be deducted generally on the total amount of invoice.

Contractor and Sub-contractor

Giving service to someone for the price is called contract. Service provider will be called contractor. The contractor’s duty is to complete the task for which an agreement has executed. When contractor further enters into a contract with another person to do the jobs completely or partly that is called sub-contractor.

It may be any work, deduction u/s 194C will be applicable when the contracts are made for any work. The following are the positions when the liability will arise.

Any works examples like broadcasting, advertisement, carriage of goods, catering, any services, You can find more examples by visiting this link;

TDS Not on Service Tax

If services of contractor are liable for service tax, the invoice’s total amount includes the service tax, then the deductor will deduct TDS only on net amount not including service tax.

You can download circular No.1/2014 (Further Clarification)

The other provisions like online deposit of TDS, Issue of TDS certificate, Quarterly Returns of TDS and penalty on failure to deposit TDS or statements are common like other nature of payments to deduct TDS.

55 Comments

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  1. i am not satisfy with that TDS will be deducted on Total amount of Bill including service Tax

    1. admin Lessmytax

      What why?? Please ask your question or query regarding this, so that I can explain according to relevant section.

  2. TDS rates for individuals for making payments to contractors wrongly mentioned in your topic- rates of TDS @1% whereas in chart @2%

    1. 194C aggregate value crossed 75,000 /- will tds has to pay along with interest

  3. i need tds rate for courier charges

    1. 1% if Individual & 2% for all others

    2. TDS on Courier Charges @ 2%

  4. Most firms deduct 1% for contractors with registered firms, however this one firm insists on deducting 2% for works contracts including supply of material, the deductions are made on the total invoice value. As per your recommendation it appears the TDS is deductable only on the service/labour component, its associated service tax and only at 1%. Have I understood this correctly?

  5. Most firms deduct 1% for contractors with registered firms, however this one firm insists on deducting 2% for works contracts including supply of material, the deductions are made on the total invoice value. As per your recommendation it appears the TDS is deductable only on the service/labour component, its associated service tax and only at 1%. Have I understood this correctly?

  6. gladson e rebello

    suppose we gave the printer to print the visiting card of the company, broucher of the company ..etc do we have to deduct tds for the same

    1. Section 194I Rent of Plant Machinery & Equipment Amt. Limit 180000 p.a @ 2% TDS will he deducted

  7. Gaddam Sudhakar

    While doing Online Payment of TDS there is Company Deductee and non company Deductee, what is that?

  8. TDS DEPOSIT ON WHICH CODE FOR COURIER SERVICE PAYMENT

  9. i need to know the TDS on security charges

  10. how can i file sales tax on online????

  11. Please inform me the latest section code 194IA & 194IB. Whether 194IA section code refers to
    TDS recovered on Rent payable/paid towards land or building & rate of TDS is it 10% & sec.code
    194IB pertains to TDS on rent payable/paid towards machinery or plant. Whether under 194IB
    rate of TDS is 2% & whether any threshold limit is there for 194IB.

  12. HI, how can i pay the interest on TDS for contractors, i mean i need to pay the interst on tds. but it the time time of payment, i am confused to choos the section like that if i am paying the TDS on contract i choose 94C.

  13. I KNOW TDS IS APPLICABLE ON THE COURIER CHARGES, KINDLY HELP ME WITH THE LIMIT.
    I HAD PAID RS.32,400.00 IN THE F.Y. 2012-13 APPROX RS.2700.00 PER MONTH SO KINDLY ADVISE WHETHER I HAVE TO DEDUCT TDS ON THE AMOUNT.
    SOME WHERE I READ THAT IF ONE BILL CROSS RS.30,000.00 OR YEARLY BILL (NO. OF BILLS DURING THE YEAR) CROSS RS.75,000.00 THEN ONLY I HAVE TO DEDUCT THE TDS FROM THE BILL.
    KINDLY ADVISE.

    1. If you have paid 32400 in one shot of payment you can deduct Tds or If you deducted for each payment no problem..

  14. whether a textile co has to deduct tds on jobwork expence for 2012-13
    where its total turnover along with its subsidiary exceed 60,00,000 for the 2011-12??

  15. What about Government Contractor……??? What is the Rate Applicable to them??????
    Explain…………….

  16. please give me information regarding TDS rates for contractors Payment

  17. but how to find out service tax component after TDS is being deducted from the total bill amount which was inclusive of service tax? when service tax liability comes i want to know what amount of service tax can be paid as tax from the whole amount which i said above. suggest me
    suppose total bill amount is Rs.100000 inclusive of service tax , TDS is 10% on the which comes to 1000. so, can any body tell me what is the service tax component out of this ?

    1. this thing is confusing me also.
      bcoz somewhere i heard that service tax is not to be included while deducting tds but on this site its says it should.
      Eg : amount- Rs 10,000
      service tax – Rs.1450
      so tds wud be deducted as per the rates for the amount which is exclusive of service tax i.e just 10000 and not total amount which is 11450. but plzz confirm this once again with someone else.

  18. i am having a query regarding TDS for contract based teachers…can u help me ..i have no idea about all this things….i was working on contract as teacher in training institute with salary Rs.4000/- pm. I worked for 12 months and by totalling varing amounts i got in this 12 months is approx. Rs.43,000/- . I left the job on 31 Jan 14 . now 2 days back i got call from institute saying they need my pan card number and as my payment is above 30,000 so i have to pay TDS 10% = 3100 rupees. I am not having any idea about this.
    hope i will get an answer from you how this thing is calculated. i have already left my job 2 months back. So still i need to pay this amount??

    Kindly advice

  19. i have to pay railtel internetbandwith charges payment how to dutuct tds whether including service tax or else excluding service tax

  20. is it necessary to deduct TDS on AMC services (category : Maintainance or repair services of machines)

  21. when we pay to the Printer for printing job in a f/y in a bill 30,000/= added bills more than 75000/= TDS to be deducted or not, expecting your reply, regards

  22. DTDC Courier rasid a bill Rs 13819 Charges for carrying documents & 30% Rs 4146 for Fuel Surcharge & Service Tax 12.36% on Rs 13819+Rs 4146 = Rs 17965 ST Rs 2220.47 Total Bill Value Rs 20186. then we which amount deducted TDS please sugest

  23. Pls suggest, TDS rate for propriatory firm or individual PAN. Pls suggest which rates are apply for piece rates works or labour work. Or which section or clouse under tds deduct.pls suggest.

  24. sir I am in FCi. FCI engaged State government’s contractor for handling and transport work with composite rates.State government paid to its contractor and now claiming the bill as reimbursement without any supervision charges.
    State government has not deducted any such amount of TDS from the bill of contractor in case of composite rate of contract and now they are raising the bill without TDS chalan.
    so now please suggest me that should i deduct the TDS or wanting TDS chalan from STate Government .
    Please try to understand me and suggest me
    Thanking you

  25. I did a sub contract with Gov. company. it is around 4 lacks job. now the company say.. they will cut 10% TDS from my full amount. is that true? its in maharshtra.

  26. maharaj contruction is treated in range of t d s deduction 2% or indvidual &treated as 1% rate for tds on bill amount
    subodh gupta is take a work in own name “subodh gupta” is treated individual &tax dedution rate is 1% or named others &charge 2%tax deducted on his bill please clear

  27. JAI PRAKASH SHAH

    we raised invoice in single (including supply and service bill ) of Rs.300000 and tds deducted on whole amount like Rs.6000 on supply and Rs.3000 in services.but the deductee will deposited of Rs.3000 in TDS file return and not deposited of Rs.6000.Then what amount we claim at the time of TDS Return File. and please tell me how will i recover of Rs.6000 from the client.

  28. Is tds is applicable even though there is no invoice raised by the contractor?

  29. When TDS is apply on supply bill

  30. IF we have paid the advance of transporter in may -15 , and the bill will be received in the month of june -15 .So kindly advise we will deduct the tds or not

    1. Yes Shakun, you have to deduct TDS when advance payment has done.

  31. Can u tell me rate of TDS on works contracts

  32. tds 2% on bill value means including tax or not?????

  33. we can deducted tds on professional bill tds deduct without including service tax amount only deduct basic
    amount on professional bill.
    if, your bill -20000.00
    service tax-2900.00
    tds deduct this bill on 20000,
    tds amount- 2000 only.

  34. TDS will be deducted only Gross amount of Bill excluding service Tax.
    as per rule.

  35. is tds applicable on fuel surcharge IN courier bill?

  36. Can u tell me rate of TDS on works contractor

  37. rate of TDS on works contractor

  38. I need to know the TDS on cab operating services

  39. we have taken services from vendor, vendor issue us invoice E.g. Rs 100000/ and we are recover some canteen amount Rs. 10000/ net payment due Rs. 90000/- so please advice we need to deduct TDS on which amount. 100000/ or 90000/.

  40. Rajendr Narayanan

    Can we deduct TDS on Cable Company who are issuing Invoice stating it is Rental Charges

  41. Dear Genies

    Here one doubt , we explaining

    Handling Charges 1000
    storage rent 1000
    service Tax 300
    Total 2300 this is example

    we are having two type of TDS Head on Single Invoice. How to calculate what is TDS act telling we confused. whom know the answer kindly share me

  42. sanjiv kumar sharma

    I wants to know the TDS return filling software . how to download , execute. Step by step needs help & from where software of tds return filling can be download.

    How to amend TDS entries like PAN, amount , customer etc

    1. Hello Sanjiv, You can check this article, here we provided complete information about TDS Return. Thanks http://www.cutmytax.com/tds-return/

  43. if the customer has crossed 100000/- limit at the end of March-2017 so TDS should be deduct on all bills amt. like that april to march-2017 …..? . please sir suggest

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