What is the TDS rate on contractor payments under Section 194C for FY 2026-27?

Question

tdsguru.in (CA firm) · Accepted Answer

1% if the contractor is an individual/HUF and 2% for any other contractor, once payments cross ₹30,000 for a single bill or ₹1,00,000 in aggregate for the year. Under Section 194C (now within Section 393 of the Income-tax Act 2025), TDS on payments to contractors and sub-contractors is 1% where the payee is an individual or HUF and 2% for any other payee (company, firm, etc.). TDS applies once a single bill exceeds ₹30,000, or once aggregate payments in the financial year cross ₹1,00,000 — and once a threshold is crossed, TDS applies on the full amount, not just the excess. If the contractor has not given a valid PAN, deduct at 20% (Section 397(2), earlier 206AA). On challans and returns, use payment code 1023/1024 and report in Form 140.