What is 194C in TDS with an example?

Section 194C is the provision of the Income Tax Act under which TDS is deducted on payments made to resident contractors for carrying out any work. Example: If ABC Ltd. pays Rs.5,00,000 to XYZ Press (a printing firm) for brochures, ABC Ltd. must deduct TDS at 2% (since XYZ is a company) = Rs.10,000. XYZ Press receives Rs.4,90,000, and Rs.10,000 is deposited with the government as TDS. The contractor claims credit for this TDS when filing their Income Tax Return.

What is the TDS limit for 194C?

There are two threshold limits under Section 194C: • Per-payment limit: Rs.30, 000 — If a single payment to a contractor exceeds Rs.30,000, TDS must be deducted. • Annual aggregate limit: Rs.1,00,000 — If total payments to the same contractor during the financial year exceed Rs.1,00,000, TDS applies on all such payments, even if each individual payment is below Rs.30,000. No TDS is required if both conditions remain unmet throughout the year.

What is Form 194C used for?

There is no "Form 194C." Section 194C is a section of the Income Tax Act — not a form. The compliance form associated with TDS under this section is Form 26Q (quarterly TDS return filed by the deductor). The TDS certificate issued to the contractor is Form 16A, generated through TRACES. Deductors deposit TDS amounts using Challan ITNS 281.

What is the difference between Section 194C and Section 194Q?

These two sections cover fundamentally different transactions: Section 194C: TDS on payments for CONTRACT WORK — when you pay someone to do something (build, transport, advertise, supply labour). Rate: 1% or 2%. Section 194Q: TDS on PURCHASE OF GOODS — applies when a buyer purchases goods worth more than Rs.50 lakh from a resident seller in a financial year. Rate: 0.1% on an amount exceeding Rs.50 lakh. Applies only to buyers with turnover exceeding Rs.10 crore in the preceding year. In short: 194C = TDS on services/contracts; 194Q = TDS on purchase of goods.

Is TDS under 194C applicable on GST?

No. TDS under Section 194C should be deducted on the base contract value EXCLUDING GST, provided GST is shown separately on the invoice. If the contractor does not show GST separately and raises a consolidated bill, TDS must be deducted on the entire gross amount including GST. Always insist on properly formatted GST invoices.

When should TDS under 194C be deposited?

TDS deducted under Section 194C must be deposited by the 7th of the month following the month of deduction. For example, TDS deducted in October must be deposited by November 7. For payments made in March, the extended deadline is April 30.

Section 194C TDS: Rates, Limits & Calculation Guide

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