The present article briefly covers the important provisions relating to TDS section 194C of the Income Tax Act along with the Frequently Asked Question.
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Basic provisions of section 194C of the Income Tax Act
Section 194C of the Income Tax Act states that any person making payment to a resident person, who is carrying out any ‘work’ in terms of the contract between the ‘specified person’ and the resident contractor, is required to deduct TDS.
The ‘specified person’ mentioned above means the following –
- The Central or State Government;
- The local authority;
- The Corporation established by the Central, State or Provincial Act;
- The Company;
- The Trust;
- The Co-operative Society;
- The registered Society;
- The authority engaged either for the purpose of dealing with and satisfying the need for the housing accommodation or for planning, improvement or development of cities, town and village;
- The university established / incorporated by Central, State or Provincial Act;
- The firm;
- The Government of a foreign state / a foreign enterprise or any association / body established outside India;
- The individual or HUF liable to audit under section 44AB [Clause (a) or Clause (b)] during the financial year immediately preceding the financial year in which the sum is credited or paid to the account of the contractor.
Further, it is mention here that the term ‘contract’ includes ‘sub-contract’.
Explaining the meaning of the term ‘work’ –
The term ‘work’ includes the following –
- Advertising;
- Carriage of goods / passengers by any mode of transport except railway;
- Broadcasting and telecasting (which also includes the production of programmes for such broadcasting or telecasting);
- Catering;
- Manufacturing / supplying a product based on the requirement and specification of customers by using material purchased from the customer. However, it doesn’t include when the material is purchased from any person other than the customer.
Rate of TDS u/s 194C
When provisions of section 194C of the Income Tax Act gets attracted, the Deductor is required to deduct TDS at the following rates –
| Particulars | Rate of TDS |
| Payment made / credited to an individual or HUF | 1% |
| Payment made / credited to a person other than an individual or HUF | 2% |
However, in case the PAN is not furnished, the Deductor would be liable to deduct TDS @ 20% i.e. at the maximum marginal rate.
List of exception i.e., cases wherein TDS not to be deducted u/s 194C
Under the following circumstances, TDS is not required to be deducted –
1. The amount paid or credited to the contractor in a single contract doesn’t exceed INR 30,000.
2. The aggregate amount paid or credited during the financial year doesn’t exceed INR 1,00,000.
3. The amount paid / credited to the account of the contractor engaged in the business of hiring, plying or leasing goods carriage, where the contractor doesn’t own more than 10 goods carriage at any time during the previous year. The Contractor is required to furnish the declaration along with the PAN to the Deductor.
4. The amount is paid or credited to the contractor by an individual / HUF for carrying out work in the nature of personal use.
Time of deduction of TDS u/s 194C
If the Deductor is required to deduct TDS as per provisions of section 194C of the Income Tax Act, then, the Deductor is required to deduct TDS within earlier of the following dates –
- At the time of credit of sum to the account of the Contractor; or
- At the time of payment in cash or cheque or draft or any other mode.
Due date of deposit of TDS u/s 194C
The Deductor is required to duly deposit the deducted TDS within following due dates –
| Particulars | Due dates |
| TDS payment for the months from April to February | Within 7 days from the end of the month in which TDS is deducted |
| TDS payment for the month of March | On or before 30th April |
| TDS payment to be done by Government Deductor (without production of challan) | On the same day |
Issuance of TDS certificate u/s 194C
The Deductor is required to issue TDS certificate in Form 16A within following due dates –
| Months | Due date |
| April to June | 15th August |
| July to September | 15th November |
| October to December | 15th February |
| January to March | 15th June |
Return filing requirements u/s 194C
Every Deductor deducting TDS in terms of section 194C is required to file a quarterly return in Form 26Q within following due dates –
| Months | Due date |
| April to June | 31st July |
| July to September | 31st October |
| October to December | 31st January |
| January to March | 31st May |
Important points –
- Value to be considered for TDS deduction in the case where work includes manufacturing / supply of product as per the specification of the customer by using the material purchased from the customer.
In such case, the TDS would be deducted on –
| Particulars | Value for TDS deduction |
| Price of the material indicated separately in the invoice | Invoice value excluding the value of material |
| Price of the material not indicated separately in the invoice | Total invoice value |
- Certain important clarification done by CBDT –
- FD Commission and brokerage are not covered under section 194C.
- Payment made to an electrician or payment made to a contractor for providing electrician service is covered under section 194C.
- Payment made to courier covered under section 194C.
- Payment made to travel agent or an airline for purchase of a ticket is not subjected to TDS under section 194C. However, if the plane, bus or any other mode is chartered, then TDS is liable to be deducted under section 194C.
- Payment made to clearing and forwarding agents for the carriage of goods is liable to TDS under section 194C.
Questions
What is Section 194c?
Section 194c requires any person making payment to person, carrying out any work in accordance with a contract between a specified person and the resident contractor, to deduct TDS at the specified rates.
What is the limit to deduct TDS US 194c?
The Deductor is required to deduct TDS @1% in case the payment is made to individual or HUF and @2% in case of payment done to any other person.
What is TDS exemption limit for contractor and sub-contractor?
TDS exemption limit is INR 30,000 in case of a single contract and INR 1,00,000 in case of aggregate amount during the financial year.
What is TDS rate for contractor?
TDS rate for contractor is 1% in case payment is done to individual or HUF and 2% in any other case.
Also Read-
(Republished with Amendments)
Author Bio
Sir, i have 4 branches in proprietor and 1 company private limited company. in these 4 branches invested from pvt ltd only. there is no revenue. all of 4 branches under loss. the loss amount it can be show in the private limited company. or not kindly advice
i have availed service & material from one vendor & he has raised single invoice of 50k in which 20k is related to my service and 30k related to material. and he is not my regular vendor in this case should i deduct TDS on 20k considering the 1 criteria i.e invoice in exceeding 30k limit or i should not deduct
Yes ! You need to deduct TDS.
Can a govt deptt. deduct incometax on the invoices received from a suppliers on a/c of day to day supplies received from time to time.
what would be the scenario if single payment to contractor is more than 30k but yearly it is less than Rs.1,00,000. Would TDS be applicable for transaction of Rs.30k or all the transactions less than 30k also. Yearly payment is Rs.84000
Purchased PC from Vendor as per Rate contract of MH Gov, for 65000/-. Is TDS applied while paying bill amount.
sir
my tds deduct under se.194C then which itr should file
ITR-3 or ITR – 4 to be filed
Dear Experts,
If i have received a single Invoice of 27500+18% GST= total amount 32450 it’s applicable TDS on this invoice U/S 194c
Sir, which itr from should i file, if income is from salary and one work has done on contract ( under section 192 and 194c) for the FY 2019-20(AY 2020-21)
what would be the scenario if single payment to contractor is more than 30k but yearly it is less than Rs.1,00,000. Would TDS be applicable for transaction of Rs.30k or all the transactions less than 30k also. Yearly payment is Rs.84000
Payment made to transporter owning more than 10 goods carriage does not exceed Rs.100000 in a year. Will we required to deduct tax on these payment under section 194C. kindly clarify
194 c me limit 100000/- ki hai.agar kisi contractor ke credit 07 month bad 85000/- rs.ki hoti hai to tds kis date per deduct kiya jaiga.aapke answer ki pratiksha hai.
PARTNERSHIP FIRM TDS RATE
if a PSU purchased parts of computer. does TDS attract under section 194c
Sir in which form should we need to file for u/s 194c
mai ek transporter hoon aur market se broker ke thru lorry lagata hoon aur lorry hire ki advance payment and balance payment broker ko karta hoon aur broker lorry owner ka non deduction TDS declaration deta hai aur tds nahi katwata hai to kaya yah sahi ya phir broker ko koi declartion dena chahiye dena chahiye to uska kya format hai
Very useful information to take decision and satisfy the contractor on the spot.
Very good article sir. Thanks for the information. Very well explained.
VERY USEFUL
Thanks for useful information
Issuing Certificate in Form 16A for Oct to Dec should be 15th February instead of 15th Janauary