# Section 194C — TDS on Payments to Contractors

## Definition of 'Work' — Critical Distinction

Works contract: Manufacturing or supplying a product according to the requirement or specification of a customer, using raw material purchased from such customer or an associate of such customer.

If raw material is purchased from a person other than the customer, it is NOT considered as 'work' — it becomes a sale of goods contract, and 194C does not apply.

## Payments to Broadcasters / TV Channels for Content Production

Scenario	Nature	Section 194C?
Program produced as per specification of TV channel/broadcaster, and copyright transferred to broadcaster	Works Contract	Yes — 194C applicable
Telecaster / Broadcaster acquires rights of already-produced content from production house	Sale Contract	No — 194C NOT applicable

## Aggregate Limit Example

Individual payments below threshold but annual aggregate exceeds ₹1,00,000 triggers TDS.

Example: Payments ₹28,000 + ₹27,000 + ₹25,000 + ₹29,000 = ₹1,09,000.

TDS @ 1% (Individual/HUF payee) = ₹1,090 to be deducted from the last payment of ₹29,000 on the cumulative ₹1,09,000.

## Transporter Exemption — No TDS Conditions

No TDS is to be deducted on payment to a transporter if all three are satisfied:

1. Transporter owns not more than 10 goods carriages at any time during the previous year

2. Transporter has furnished PAN and declaration to this effect

3. Engaged in business of plying, hiring or leasing goods carriages

## Other Specific Items

Service	Section
Warehousing charges	194-I (NOT 194C)
Cold storage (for refrigeration & storage)	194C
Catering	Falls within 'Work' under 194C

## Advertisement Chain — Payment Flow

Client → Advertising Agency: TDS u/s 194C APPLIES (Client deducts)
Advertising Agency → Newspaper / TV Channel: TDS u/s 194C DOES NOT APPLY

## Scope Limitations

Section 194C applies only in relation to 'works contracts'.
Labour contracts are covered (since they are service contracts), but NOT contracts for sale of goods.
Section 194C does NOT include contracts of personal nature (Section 194M applies if aggregate > ₹50 lakhs to HIJACR exception cases).

Worked example

### Example 1

Q: A TV channel commissions a production house to produce a serial as per its specifications. The copyright vests with the TV channel. Is TDS u/s 194C deductible on the payment?

Solution: Yes. Since the work is done as per specifications and copyright transfers to the broadcaster, it is a works contract → 194C applicable.

### Example 2

Q: ABC Ltd makes four payments of ₹28,000, ₹27,000, ₹25,000 and ₹29,000 to an individual contractor during the year. How is TDS u/s 194C deducted?

Solution: Aggregate = ₹1,09,000 (> ₹1,00,000 threshold). Although no single payment exceeds ₹30,000, aggregate crosses limit. TDS @ 1% on full ₹1,09,000 = ₹1,090, to be deducted from the last payment of ₹29,000.

### Example 3

Q: Mr. T owns 8 trucks and provides transportation services to PQR Ltd. He furnishes PAN and a written declaration. Is TDS u/s 194C deductible?

Solution: All conditions of small transporter exemption are met (≤10 carriages, PAN + declaration furnished, business of plying goods carriages). No TDS is required.

⚠️ Common exam mistakes

Deducting TDS u/s 194C on warehousing charges (it is 194-I).
Not deducting TDS on aggregate that crosses ₹1,00,000 even when no single payment crosses ₹30,000.
Deducting TDS from an advertising agency's payment to a newspaper (no TDS at that leg).
Treating a sale of standard goods (raw material sourced independently) as 'works' under 194C.
Granting transporter exemption without obtaining both PAN and the small-transporter declaration.

Reference: Section 194C — Income-tax Act, 1961

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Section 194C — TDS on Contracts & Special Cases

Worked example

⚠️ Common exam mistakes