Tds on contractual employees in govt offices

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Prakash Gusain (Querist)
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02 April 2015 I m emp. In state run govt deptt on contract basis.
What rate/section of TDs will be applicable on my salary?

CA. SHIVA SHANKARA R. SHETTY

CA. SHIVA SHANKARA R. SHETTY (Expert)
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02 April 2015 In case, contract agreement between you and dept, then tds rate will be 1% u/s. 194C

Otherwise, tds will be computed as
Total Income recd
Less: deduction
Taxable income
Tax on taxable income
Tax amount

No.of months you worked

TDS will be - Total tax amount will be divided by the no.of months, you worked

Prakash Gusain

Prakash Gusain (Querist)
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02 April 2015 Thx
My employer is insisting to deduct @10% u/s 194j
Please advise on relevant references to support of u/s 194c.

Rgds

CA. SHIVA SHANKARA R. SHETTY

CA. SHIVA SHANKARA R. SHETTY (Expert)
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02 April 2015 In case work involves mannual work, effort, then it will be comes under section 194C

In case work involves the skill, talent, mind then it will be comes under section 194I

So, you can decide yourself, your scope of work falls under which section.

Prakash Gusain

Prakash Gusain (Querist)
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02 April 2015 Thanks,
Sir,

Could u plz put some references to convince my employer (if available).
Thanks & regards

Pg

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Got it! Here’s how you can explain and support your case about **TDS on contractual employees in government offices**:

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### 1. **Section 194C — Payment to Contractors**

* **Section 194C** applies to payments made for **"work contracts"** or contracts involving **manual labor or physical work**.
* The term **“work”** includes **transport of goods or passengers, construction, repair, etc.** (Section 194C covers “work” broadly).
* The **TDS rate under 194C is 1% for individual/HUF contractors** and 2% for others (like companies).
* This is often used when **contractual workers perform manual work or physical services**.

**Reference:**
Income Tax Act, Section 194C:
*"Any person responsible for paying any sum to any resident contractor for carrying out any work (including supply of labor for carrying out any work) shall deduct tax at source."*

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### 2. **Section 194J — Fees for Professional or Technical Services**

* **Section 194J** applies to payments for **professional or technical services** such as consultancy, legal services, technical work, etc.
* If the contract involves **intellectual or professional services rather than manual labor**, TDS under 194J is applicable.
* The TDS rate is generally **10%** under Section 194J.

**Reference:**
Income Tax Act, Section 194J:
*"Any person responsible for paying any sum by way of fees for professional services shall deduct tax at source."*

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### 3. **Which section applies to your case?**

* If your contract involves **manual/physical work** (e.g., clerical work, security, cleaning, manual tasks), then **Section 194C at 1% is applicable**.
* If your contract involves **professional/technical work** (e.g., consulting, IT services, advisory), then **Section 194J at 10% applies**.

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### 4. **How to convince your employer?**

* Ask your employer to check the **nature of the contract and scope of work** — manual vs. professional.
* Share the Income Tax Act sections mentioned above.
* Suggest a **review of the contract terms** to clarify which section applies.

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If you want, I can draft a formal note/letter citing the relevant sections to share with your employer. Would you like me to do that?

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