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

**Category:** Tax Guide | **Published:** 2026-05-03 | **Last reviewed:** 2026-06-19 | **Author:** Mr. Harshal Harshe

Section 194C of the Income Tax Act covers TDS on contractor payments above ₹30,000 per contract or ₹1,00,000 per year, at 1% to individuals/HUF and 2% to others. Section 194J covers professional fees above ₹30,000 per year, at 10% standard and 2% for technical services. Section 194-IB applies to monthly rent above ₹50,000 paid by individuals not subject to audit, with 5% deducted once a year via Form 26QC (Form 141 Schedule A from 1 April 2026) and Form 16C (Form 132 from 1 April 2026) issued to the landlord. Examples and how to show TDS on a payment receipt below.

> **Myth:** TDS on rent under Section 194-IB is deducted every month, like an EMI.
>
> **Fact:** It is a one-time annual deduction of 5% taken in March or the last month of tenancy, filed via [Form 26QC](https://www.incometax.gov.in/iec/foportal/), and most tenants miss it.

## What is TDS and who must deduct it?

> **Short answer:** TDS means the payer deducts a set percentage before paying the recipient and deposits it with the government under the [Income Tax Act](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx); the recipient then claims that credit in their ITR.

- 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.

## Which TDS section, rate, and threshold applies to my payment?

> **Short answer:** Contractor payments fall under [Section 194C](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx) at 1-2%, professional fees under [Section 194J](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx) at 10%, and rent above Rs. 50,000/month under [Section 194-IB](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx) at 5%.

| Section | Covers | Threshold | Rate |
| --- | --- | --- | --- |
| 194C | Payments to contractors and sub-contractors | Rs. 30,000 per contract OR Rs. 1,00,000 per year | 1% to individual/HUF; 2% to others |
| 194J | Professional and technical service fees | Rs. 30,000 per year | 10% for most professional fees; 2% for technical services |
| 194-IB | Rent paid by individuals/HUF not liable to audit | Monthly rent above Rs. 50,000 | 5% deducted once per year |

*TDS at a glance for the three common service-payment sections. Source: Sections 194C, 194J and 194-IB, Income Tax Act 1961, Income Tax Department.*

## How does Section 194C work for payments to contractors?

> **Short answer:** Under [Section 194C](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx), deduct 1% if the contractor is an individual/HUF or 2% otherwise, once payment crosses Rs. 30,000 per contract or Rs. 1,00,000 in aggregate during the year.

- 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.

## How does Section 194J work for payments to professionals?

> **Short answer:** Under [Section 194J](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx), deduct 10% on professional fees (2% for technical services) once payments cross Rs. 30,000 in a year.

- 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. 30,000 per year.
- The rate is 10% for most professional fees and 2% for technical services.
- Example: you pay a CA Rs. 50,000 for audit work, so TDS at 10% is Rs. 5,000; you pay the CA Rs. 45,000 and deposit Rs. 5,000.
- If a professional does not provide PAN, TDS is deducted at 20% under Section 206AA.

## How does Section 194-IB work for TDS on rent by individuals?

> **Short answer:** Individuals/HUF not liable to audit deduct 5% once a year on rent above Rs. 50,000/month under [Section 194-IB](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx), file [Form 26QC](https://www.incometax.gov.in/iec/foportal/), and issue Form 16C to the landlord.

The 5% 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 5% 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 5% = Rs. 3,000 from one month's rent (typically March), deposit it via Form 26QC, and give the landlord Form 16C.

**[Generate a Section 269ST-aware payment receipt](https://hrareceipt.in/misc-receipt)**

## How do I show TDS on a payment receipt?

> **Short answer:** Show gross amount, the TDS deducted with its section and rate (for example u/s 194J at 10%), and the net amount paid on the [payment receipt](/misc-receipt) so the recipient can claim credit.

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 @ 5%: Rs. 3,000 | Amount received: Rs. 57,000"

- 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](/answers/pan-collection-rule-114b).

**[Generate a payment receipt that shows TDS](https://hrareceipt.in/misc-receipt)**

## What happens if TDS is not deducted?

> **Short answer:** The expense may be disallowed under [Section 40(a)(ia)](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx), interest runs at 1% and then 1.5% per month, and penalty under Section 271C equals the TDS that should have been deducted.

- 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.

## Primary sources

- [Section 194C, Income Tax Act 1961, Income Tax Department](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx) — TDS on contractor payments
- [Section 194J, Income Tax Act 1961, Income Tax Department](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx) — TDS on professional fees
- [Section 194-IB, Income Tax Act 1961, Income Tax Department](https://www.incometaxindia.gov.in/Pages/acts/income-tax-act.aspx) — TDS on rent by individuals
- [Form 26QC + 16C (Form 141 Schedule A + Form 132 from 1 April 2026) — Income Tax e-Filing portal](https://www.incometax.gov.in/iec/foportal/) — Section 194-IB filing forms; consolidated under Section 393(1) for Tax Year 2026-27 onwards

## Related

- [When do you legally need to issue a payment receipt?](https://hrareceipt.in/answers/payment-receipt-when-why)
- [Generate a salary slip (for payroll records)](https://hrareceipt.in/salary-slip)

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*Source: [TDS Sections 194C, 194J, 194-IB: Which Rate and Threshold Applies to Your Payment?](https://hrareceipt.in/answers/tds-194c-194j-194ib-guide) — HRAReceipt.in*
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