# Section 194C — TDS on Payments to Contractors

## Who deducts?

Payer: Any person except Individuals / HUF whose business turnover ≤ ₹1 cr or profession gross receipts ≤ ₹50 L in the immediately preceding FY.
Payee: Resident contractor / sub-contractor (carrying out any 'work').

## Threshold (aggregate)

Single payment > ₹30,000, OR
Aggregate payments > ₹1,00,000 in a financial year.

## Rate

1% — if payee is Individual / HUF.
2% — for others (companies, firms, etc.).

## What is 'work' (Sec 194C definition — includes)

Advertising; broadcasting & telecasting; carriage of goods/passengers (other than by railways); catering; manufacturing/supplying a product as per customer's spec using material purchased from such customer.

## Exception

If material is purchased from a person other than the customer, it is treated as a sale — not 'work'.

Worked example

### Example 1

Example: Co. pays Mr. R (individual) ₹40,000 for a printing job. TDS u/s 194C @ 1% = ₹400.

### Example 2

Example: Co. pays ABC Pvt Ltd ₹2,00,000 for catering. TDS @ 2% = ₹4,000.

### Example 3

Example: Three payments of ₹25,000 each (aggregate ₹75,000) — no TDS as neither single nor aggregate threshold breached. A fourth payment of ₹40,000 — TDS now applies on entire ₹1,15,000 (aggregate > ₹1,00,000).

⚠️ Common exam mistakes

Forgetting to switch rate based on payee type (1% Ind/HUF vs 2% others).
Missing the aggregate threshold once single-payment threshold isn't breached.
Treating a contract as 'work' even when materials were not supplied by the buyer (it becomes a sale, no TDS).

Reference: 194C

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Section 194C — Payment to Contractors / Sub-contractors

Worked example

⚠️ Common exam mistakes