TDS · Section 194C · FY 2026–27
Section 194C: TDS on Contractual Payments
Section 194C (TDS on Contractual Payments): the TDS rate is 1% (individual/HUF) / 2% (company, firm, AOP). Threshold: Rs. 30,000 per single transaction, or Rs. 1,00,000 aggregate per financial year per deductor. From 1 April 2026 the Income-tax Act, 2025 moves it to Section 393(1) Sl. 6(i), with the same rate and threshold.
Section 194C applies to payments for carrying out any work in pursuance of a contract — including content writing, data entry, transcription, video editing, and similar operational contract work. Distinct from 194J (which covers professional services).
Rate source: Income Tax Department TDS rate chart
1%
1% (individual/HUF) / 2% (company, firm, AOP)
Threshold
₹30K per payment · ₹1L a year
Who deducts
Companies, LLPs, partnerships, audited individuals/HUFs.
No PAN
20%
Shows up in
Form 26AS & AIS, quarterly
What it looks like on a real payment
Worked exampleSec 194C
Amount payable to you₹1,00,000
TDS @ 1%− ₹1,000
You receive₹99,000
The ₹1,000 is not lost — it is pre-paid tax, credited in your 26AS and adjusted at filing.
Example assumes payee is an individual/HUF; companies/firms attract 2%. TDS is on the service value EXCLUDING GST per CBDT Circular 23/2017 when GST is shown separately on the invoice.
Run your own numbersFree 194C calculator — invoice amount in, deduction and take-home out. No signup.What this means for you
Contract work such as writing, data entry or transcription usually is not a specified profession, so the 50% presumptive scheme (s.58, formerly 44ADA) may not be open to you. The Rs. 1,000 TDS is a credit against your final tax: if your total tax ends up below the TDS deducted, the difference is refunded at filing.
From 1 April 2026, the Income-tax Act 2025 renumbers this as Section 393(1) Sl. 6(i). The rate and threshold are unchanged — only the citation moves.
When your client must deposit it — and report it
The client must deposit TDS by the 7th of the month after deduction (30 April for March). It reaches your 26AS only after they file the quarterly TDS statement (Form 26Q), due on these dates — which is why a deduction in March can be invisible until 31 May:
Form 26Q · quarterlyFY 2026–27
Q1 — Apr to Jun31 July
Q2 — Jul to Sep31 October
Q3 — Oct to Dec31 January
Q4 — Jan to Mar31 May
FAQ
What is the TDS rate under Section 194C?
Who deducts TDS under Section 194C?
What is the threshold for Section 194C TDS?
Is TDS under Section 194C deducted on the GST-inclusive amount?
How do I claim TDS deducted under Section 194C in my ITR?
Not sure how to claim this TDS back? Read the freelancer’s guide to TDS deducted by clients — how it lands in your 26AS and how you reclaim it in your ITR.
For the CA reading this
The deadline sheet you already send, with your name on it
Every statutory date for the month — GST returns, advance tax, and the dates your client's own customers owe them: when the TDS they withheld must reach the department, and when the certificate is due. Add your firm's name and forward it as it stands. No signup, no email, nothing to accept.
The image is the one that travels on WhatsApp. Dates are statutory, not advice — the sheet says which rows bind whom.
Sources
Rates as notified for FY 2026–27 and can change. General information, not tax advice. Verify with your CA before you file.
Related sections
Every deduction, tracked to the rupee
Your TDS credits, never lost.
HourSlip logs the expected deduction on every invoice and reconciles it against 26AS — so filing season has no surprises.
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