Tax Deducted at Source (TDS) is applicable on specified payments such as salary, commission, rent, interest, professional fees, etc., under the Income Tax Act, 1961. And, businesses & individuals are supposed to deduct TDS under specified categories mandated by the income tax department.
This blog takes you through one of the most important categories for monthly TDS payments for businesses – Section 194C. Read on.
What is section 194C?
Section 194C is a TDS category applicable on any contractor payment made to an Indian resident (including supplying labour). The payments can be done by the following personas under Section 194C:
- Indian Government entity
- Registered Indian limited company, co-operative, trust or a firm
- University or deemed educational institution
- An individual or a Hindu Undivided Family (HUF) with turnover or gross receipts exceeding Rs. 1 crore (for business) or Rs. 50 lakhs (for an individual) during a particular financial year
Section 194C is applicable on the following contractor payments if contractors or subcontractors are Indian residents:
- Advertising, broadcasting, telecasting (including programme production for broadcasting and telecasting)
- Carriage of cargo, goods & passengers (except railways)
- Labour supply
What is the TDS rate under Section 194C?
The deductor should deduct TDS rate at 1% if payments are made to an individual /HUF. And, at 2% in all other cases. If the deductee does not provide his PAN (Permanent Account Number) then TDS should be deducted at 20%.
When is TDS deducted under Section 194C?
The deductor needs to deduct TDS when:
- the amount is credited to the deductee’s account
- the payment is made to the deductee by cash, cheque, bank draft, or through any online mode of payment
Exceptions under Section 194C
Section 194C is not applicable under the following conditions:
- A single contract amount is less than or equal to Rs. 30,000
- The total amount paid or payable during a financial year is less than or equal to Rs. 1,00,000
- An individual or a HUF makes a payment to an individual/ any other member of HUF for a personal purpose
- Contractor payments for plying, leasing or hiring of goods carriages if the contractor furnishes his PAN to the deductor
Due dates for depositing TDS under Section 194C
|The month of payment||When the deductor is|
|Government||Other than the Government|
|Month of March||Same Day||On or before April 30th|
|Other Months||Same Day||Within 7 days from the subsequent month|
The deductor can pay TDS by filling Challan No. ITNS 281 (under section 94C – Payment to Contractors and Sub-Contractors) via
- Physically visiting an authorised bank branch
- Logging on the NSDL website
- Free TDS payment tool powered by RazorpayX
Filing of quarterly TDS returns
- TAN / PAN of the deductee
- Amount of payment
- Amount of tax deducted
- Rate of tax applicable
- Date of tax deduction
- Date of payment/credit
Form 26Q must be filed for each quarter on or before the following due dates –
|Quarter Period||Due Date|
|Jan-Mar||May 31 *|
Every deductor is required to provide a tax deduction certificate (Form 16A) to the payee within 15 days of furnishing the quarterly statement, except for salary payments. Form 16A can be generated & download through the TIN central system.
The due dates for furnishing Form 16A are as follows:
|Quarter Period||Due Date|
|Apr-Jun||Jul 30||Aug 15|
|Jul-Sep||Oct 30||Nov 15|
|Oct-Dec||Jan 30||Feb 15|
|Jan-Mar||May 30||June 15 *|
We hope this guide helped you understand TDS payments under Section 194C.
If you struggle to manually calculate and pay monthly TDS for your business, click the link below to know how you can put an end to that struggle, today!
Frequently Asked Questions (FAQs)
Who is a TDS deductor under section 194C?
A deductor is any person who is responsible for making a payment against a contract.
Who is a deductee under section 194C?
A deductee is an Indian resident to whom the payment is made.
What is the Interest on late payment or non-payment of TDS under section 194C?
- An interest of 1% per month is applicable if a deductor fails to deposit TDS. The interest will apply from the due date of deduction to the actual date of deduction
- Late payment of TDS attracts an interest of 1.5% per month from the actual date of deduction to the date of final payment
- Delay in filing the TDS return attracts a penalty of Rs. 200 per day