Section 194C: Definition, Meaning & Guide for Indian Businesses

Section 194C of the Income Tax Act requires TDS on payments to contractors and sub-contractors at 1 percent (individual/HUF) or 2 percent (others).

What is Section 194C?

Section 194C of the Income Tax Act covers TDS on payments to contractors and sub-contractors for any work including supply of labour. The deductor is the person paying. TDS rate is 1 percent if the payee is an individual or HUF, and 2 percent for all other entities. Threshold: TDS applies if single payment exceeds 30,000 rupees or aggregate annual payments exceed 1 lakh rupees. Without PAN, the rate jumps to 20 percent under Section 206AA. Deposit by 7th of the following month, file quarterly return in Form 26Q.