TDS Sections 194C, 194J, 194-IB: Which Rate and Threshold Applies to Your Payment?

• →Tax Deducted at Source (TDS) means the payer holds back a percentage of the payment before releasing it to the recipient and deposits it with the government.
• →The recipient claims credit for the TDS deducted when filing their ITR.
• →Any company, firm, or individual/HUF with books of accounts who makes payments crossing the prescribed thresholds must deduct.
• →A salaried individual paying a contractor for personal home repair is generally exempt, but a business owner making the same payment is not.

• →Section 194C applies to contractors and sub-contractors for any work such as construction, printing, advertising, broadcasting, transport, and catering.
• →The threshold is Rs. 30,000 per contract OR Rs. 1,00,000 in aggregate during the year.
• →The rate is 1% if paid to an individual/HUF and 2% if paid to others.
• →Example: you hire a carpenter for Rs. 45,000, so TDS at 1% is Rs. 450; you pay Rs. 44,550 and deposit Rs. 450 to the government.
• →Transporters with a valid PAN who declare they own 10 or fewer trucks are exempt from 194C deduction.

• →Section 194J covers fees for professional services such as doctors, lawyers, CAs, architects, engineers, consultants, technical services, royalties, and non-compete fees.
• →The threshold is Rs. 50,000 per year.
• →The rate is 10% for most professional fees and 2% for technical services.
• →Example: you pay a CA Rs. 60,000 for audit work, so TDS at 10% is Rs. 6,000; you pay the CA Rs. 54,000 and deposit Rs. 6,000.
• →If a professional does not provide PAN, TDS is deducted at 20% under Section 206AA.

The 2% is deducted once per year, typically in March or the last month of tenancy, not every month. Most tenants and landlords are unaware of this, and it results in interest and penalty notices.

• →Section 194-IB applies to rent paid by individuals/HUF who are not liable for audit to a landlord.
• →The threshold is monthly rent above Rs. 50,000 and the rate is 2% deducted once per year.
• →Form 26QC must be filed (Form 141 Schedule A from 1 April 2026 under Section 393(1) of the Income-tax Act, 2025) and Form 16C issued to the landlord (Form 132 from 1 April 2026).
• →Example: you pay rent of Rs. 60,000/month, so you deduct 2% = Rs. 1,200 from one month's rent (typically March), deposit it via Form 26QC, and give the landlord Form 16C.

Examples of the line to print:

"Gross amount: Rs. 50,000 | TDS deducted u/s 194J @ 10%: Rs. 5,000 | Net amount paid: Rs. 45,000"

"Total amount: Rs. 60,000 | TDS u/s 194IB @ 2%: Rs. 1,200 | Amount received: Rs. 58,800"

• →Showing TDS helps the recipient claim TDS credit in their ITR.
• →It protects the payer from demands that TDS was not deducted.
• →It creates an audit trail for both parties.
• →It prevents disputes about the gross vs. net amount agreed upon.
• →For when PAN is mandatory on the receipt, see our Rule 114B PAN-collection guide.

• →The entire expense may be disallowed under Section 40(a)(ia), costing you the tax deduction on that expense.
• →Interest at 1% per month is levied from the date TDS was due to the date it is deducted.
• →Interest at 1.5% per month is levied from the date of deduction to the date of deposit.
• →Penalty under Section 271C equals the amount of TDS that should have been deducted.
• →When in doubt about a contractor payment above Rs. 30,000, the safe practice is to deduct 1-2% and deposit via Challan 281, since the cost of deducting unnecessarily is small and the cost of not deducting when required is large.