Queries about TDS calculation in 194C

1. ❌ Not just ₹30K → ✔️ TDS (if applicable) on ₹1,10,000
2. ❌ Not 194C → ✔️ Likely:
   • 2% Equalisation Levy, OR
   • Section 195 (case-specific)

Thanks for the reply. The payment is being made to Facebook India having office in India. 

What is the need of equalisation levy or section 195? I think these are applicable for foreign companies.

Please confirm if 194C is correct for TDS deduction.

TDS applicable on Advertisement @ 2% under section 194C on assessable amount.

Handling TDS for advertising payments to a platform like Facebook can be a bit tricky once you cross that threshold. Based on the provisions of Section 194C, here is how you should handle the calculation:

### 1. Calculation Base: 30k or 1.1L?

Once the aggregate total of payments to a single party exceeds **₹1,00,000** in a financial year, TDS is applicable on the **entire amount** paid during the year, not just the incremental amount.

Since your total has reached ₹1.1L in Q4:

 * You must deduct TDS on the **full ₹1,10,000**.

 * In Q4, when you process the ₹30,000 payment, you will calculate the tax for the whole ₹1.1L and deduct it from this final payout.

### 2. TDS Rate under Section 194C

The rate depends on the legal status of the "Contractor" (the payee):

 * **Individual / HUF:** 1%

 * **Others (Companies/Firms):** 2%

Since the payments are made to **Facebook (a Company)**, the applicable rate is **2%**.

**Total TDS Deduction:**

₹1,10,000 \times 2\% = ₹2,200

### **⚠️ Important Note: Section 194C vs. 194O vs. Equalization Levy**

While many professionals use **194C** (Contract/Work) for ad spends, there are two other things you should double-check:

 * **Equalization Levy (EL):** If Facebook is being paid as a non-resident entity and doesn't have a Permanent Establishment in India, you might actually be looking at an **Equalization Levy of 6%** rather than TDS under 194C.

 * **Section 194O:** If the payment is routed through an e-commerce participant, a 1% TDS might apply under 194O.

However, if you are certain it falls under 194C, the **2% on the gross 1.1L** is the correct way to catch up on the deduction. Be sure to deposit the amount by the 7th of the following month (or by April 30th if it's a March provision) to avoid i

nterest penalties!

Section 194C works on cumulative threshold logic and this trips up a lot of people.

The threshold is Rs.30,000 per single payment OR Rs.1,00,000 aggregate in a financial year to that contractor. Once cumulative payments cross Rs.1,00,000, TDS applies on ALL payments made during the year (not just on amounts above the threshold). Many people deduct TDS only on the excess - that is wrong.

Rates:
- Individual or HUF contractors: 1%
- Company contractors (Pvt Ltd, LLP etc): 2%
- Contractor does not provide PAN: 20% flat under Section 206AA

For advertising payments specifically: if it is a domestic agency billing you for the ads, Section 194C applies normally. If you are paying directly to a foreign platform like Google or Meta, it is not Section 194C - it falls under Section 195 or the equalisation levy depending on the structure.

Under the Income Tax Act 2025, old Section 194C has been renumbered as Section 393. Compliance process and thresholds remain unchanged. This [TDS on contractor payments guide](https://taxgarden.in/blog/tds-on-contractor-payments-section-194c-393-guide-india) covers the calculation with worked examples.

Section 194C is not the appropriate provision on the facts stated. Payments to Facebook for online advertising are generally considered under section 194C only if the arrangement is a contract for carrying out advertising work; the payment’s descripttion alone is not enough to settle the classification. The agreement, nature of services and whether the payee is resident should be checked.

• If section 194C applies, the annual threshold is ₹30,000 per payment or ₹1,00,000 in aggregate during the financial year. As aggregate payments reach ₹1,10,000, TDS applies; deduct on the full ₹1,10,000, not merely the Q4 ₹30,000, and deposit the shortfall for earlier payments with applicable interest.
• For a resident payee, the rate under section 194C is 1% where the contractor is an individual/HUF and 2% for other resident contractors. On ₹1,10,000, that is ₹1,100 or ₹2,200 respectively, before considering any tax already deducted. If the payee is non-resident, section 194C rates do not apply; assess the payment under the relevant non-resident withholding provisions.

This classification and year-wise TDS reconciliation should be built into the advertising-payment workflow. Manual tracking of numerous small transactions is difficult; automation reduces repetitive reconciliation while leaving classification and compliance judgment in the professional’s control. Our platform offers 2,000+ AI agents and 650+ integrations covering only relevant workflows. For a walkthrough of this workflow, connect with us on WhatsApp at https://wa.me/message/3HVOZ7HIY4ESC1.