TDS applicable on FOOD bill

When there is a contract of catering services between a contractor and ‘specified persons’ and a payment is made to the contractor for undertaking any ‘work’ in the nature of catering services in furtherance to the contract, TDS is to be deducted on such payment as per the specified rate.

• Rate of deduction of TDS on Catering Services under Section 194C of the Income Tax Act, 1961

  The rate of TDS to be deducted is as under: –

• TDS shall be deducted at the following rates under Section 194C of the Act depending on whether the payment is made to an Individual/ HUF or other than an Individual/ HUF:
  • • Credit is given/ Payment is made to an Individual/ HUF – 1%
    • Credit is given/Payment is made to a person other than an Individual/ HUF – 2%
• When the food is served in the restaurant in a normal or ordinary course of business, it will not be considered a catering contract or service under Section 194C. – Circular No.: 715/ 1995.

Depends on the arrangement:

• One-off food bill at a hotel or restaurant (dining, meeting lunch): this is a purchase, not a "contract for work", so no TDS.

• Catering under a contract or regular arrangement (canteen, event catering, annual rate contract): "work" in Sec 194C expressly includes catering. TDS at 1% (individual/HUF) or 2% (others) if a single bill exceeds Rs 30,000 or the total for the year exceeds Rs 1 lakh.

• Banquet hall plus food package from a hotel: the hall portion falls under Sec 194I (10%) if rent exceeds Rs 50,000 a month (from 1 April 2025); the catering portion under 194C. Ask for separate bills.

• Deduct on the value excluding GST if GST is shown separately (CBDT Circular 23/2017).

• From 1 April 2026: Sec 393 of the Income-tax Act, 2025.