1% (individual/HUF), 2% (others) on contractor payments. ₹30K single / ₹1L aggregate. Transporter (≤10 vehicles) NIL with declaration. Works contract + labour + transport.
SECTION 194C TDS (contractor payments): (1) PAYEE individual/HUF: 1%. (2) PAYEE others (company/firm): 2%. (3) TRANSPORTER (with PAN, ≤10 vehicles): NIL (declaration). THRESHOLD: ₹30,000 SINGLE payment OR ₹1,00,000 AGGREGATE per FY. NO PAN: 20%. EXAMPLE: ₹5L paid to construction contractor (firm). (a) TDS 2% = ₹10K. (b) Net ₹4.9L. (c) Contractor claims credit. APPLIES: works contract, labour, catering, advertising, transport.
194C COVERS: (1) WORKS CONTRACT (construction, repair). (2) LABOUR supply. (3) CATERING. (4) ADVERTISING contracts. (5) TRANSPORT of goods/passengers. (6) BROADCASTING + telecasting. (7) MANUFACTURING per customer specification (job work). (8) COURIER services. NOT 194C: (a) Professional fees (194J). (b) Rent (194I). (c) Pure sale of goods. STRATEGIC: classify works contract (194C 1-2%) vs professional (194J 10%) correctly — major rate difference.
TRANSPORTER NIL TDS (194C(6)): (1) TRANSPORTER owning ≤ 10 GOODS CARRIAGES. (2) Provides PAN + DECLARATION. (3) NO TDS deducted. (4) Payer reports in TDS return (with PAN). CONDITIONS: (a) Engaged in plying/hiring goods carriages. (b) ≤ 10 vehicles at any time during FY. (c) Furnishes declaration + PAN. STRATEGIC: small transporters benefit from NIL TDS. Large fleet operators (>10): normal 1-2% TDS. Keep declarations on file.
194C THRESHOLD: (1) SINGLE payment > ₹30,000: TDS applies. (2) AGGREGATE > ₹1,00,000 in FY: TDS applies (even if individual payments < ₹30K). (3) BOTH conditions monitored. EXAMPLE: 5 payments of ₹25K each = ₹1.25L aggregate. (a) Each < ₹30K. (b) But aggregate > ₹1L → TDS on full ₹1.25L. STRATEGIC: track cumulative payments to same contractor. Many businesses miss aggregate threshold — leads to disallowance + penalty.
194C STRATEGY: DEDUCTOR: (1) TAN + timely TDS. (2) Correct rate (1% individual / 2% others). (3) Monitor ₹30K single + ₹1L aggregate. (4) Transporter declarations on file. (5) Quarterly Form 26Q. (6) Form 16A to contractors. (7) Avoid Section 40(a)(ia) 30% disallowance. CONTRACTOR: (1) Provide PAN. (2) Claim TDS credit. (3) Presumptive 44AD (8%/6% deemed) if eligible. (4) Refund if excess. STRATEGIC: construction + works contract businesses heavily use 194C. Classify vs 194J. Track aggregates. CONSULT CA.