194C TDS ON CONTRACTOR

TDS deduction ki liability ka faisla karne ke liye, humein kuch factors ko consider karna hoga: TDS Deduction Rules 1. *Section 194C*: TDS deduction on transportation contracts, including freight payments. 2. *Threshold Limit*: ₹1,00,000 per financial year. Calculation 1. *Total Freight Payment*: ₹1,53,000 (above the threshold limit) 2. *TDS Rate*: 1% or 2% (depending on the type of vehicle and payment nature) Liability 1. *Yes*, you are liable to deduct TDS on the freight payment, as the total payment exceeds the threshold limit of ₹1,00,000. 2. *TDS Amount*: Calculate the TDS amount based on the applicable rate (1% or 2%) and the total freight payment. Action Items 1. *Obtain PAN*: Ensure you have the PAN of the transporter or the person receiving the freight payment. 2. *Deduct TDS*: Deduct the calculated TDS amount from the freight payment. 3. *Deposit TDS*: Deposit the deducted TDS amount to the government within the specified due date. 4. *Issue TDS Certificate*: Issue a TDS certificate (Form 16A) to the transporter or the person receiving the freight payment. Consult a tax professional or chartered accountant to ensure compliance with TDS regulations and to avoid any potential penalties.

From April 1, 2026, Section 194C under the old Income Tax Act has been renamed as Section 393(1) under the new Income Tax Act 2025.

There is no change in the TDS rates:
• 1% for Individuals and HUFs
• 2% for all other entities

The TDS threshold also remains the same:
• Rs. 30,000 for a single payment
• Rs. 1,00,000 total payments during the financial year

The main practical change is during TDS payment and return filing.
While depositing TDS, taxpayers must now select the new section code “393” instead of “194C” in the challan and TDS return forms. Using the old code may result in validation errors while filing returns.

Detailed guide:
TaxGarden – Section 194C to 393(1) Guide