{"id":7615,"date":"2025-07-10T12:20:56","date_gmt":"2025-07-10T12:20:56","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/?post_type=glossary&#038;p=7615"},"modified":"2025-07-10T12:20:57","modified_gmt":"2025-07-10T12:20:57","slug":"section-194c","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/section-194c\/","title":{"rendered":"Section 194C"},"content":{"rendered":"<p><strong><a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/section-194c\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Section 194C<\/a><\/strong> is a rule in the Indian <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/income-tax-act\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Income Tax Act<\/a>.<br>It says that if a person or business <strong>pays a contractor<\/strong>, they must <strong>deduct <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/tds\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>TDS<\/a> (<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/tax\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>Tax<\/a> Deducted at Source)<\/strong> before making the payment.<\/p>\n\n\n\n<p>In simple words, it means:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>&#x201C;If you hire someone to do a job and pay them, you must first cut a small portion as tax and give it to the government.&#x201D;<\/p>\n<\/blockquote>\n\n\n\n<h3 id=\"who-needs-to-deduct-tds-under-section-194c\" class=\"wp-block-heading\"><strong>Who Needs to Deduct TDS Under Section 194C?<\/strong><\/h3>\n\n\n\n<p>The following people must deduct TDS when paying contractors:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Individuals or HUFs (only if their business turnover is over &#x20B9;1 crore or professional income is over &#x20B9;50 lakh)<\/li>\n\n\n\n<li>Companies<\/li>\n\n\n\n<li>Firms<\/li>\n\n\n\n<li>Government bodies<\/li>\n\n\n\n<li>Cooperative societies<\/li>\n<\/ul>\n\n\n\n<h3 id=\"when-does-section-194c-apply\" class=\"wp-block-heading\"><strong>When Does Section 194C Apply?<\/strong><\/h3>\n\n\n\n<p>It applies when you pay for:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A contract to do work (like building, cleaning, manufacturing)<\/li>\n\n\n\n<li>Supply of labor<\/li>\n\n\n\n<li>Transport services (if vehicle is <strong>not owned<\/strong> by transporter)<\/li>\n<\/ul>\n\n\n\n<h3 id=\"tds-rates-under-section-194c\" class=\"wp-block-heading\"><strong>TDS Rates Under Section 194C<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table><thead><tr><th>Type of Payee<\/th><th>TDS Rate<\/th><\/tr><\/thead><tbody><tr><td>Individual or HUF<\/td><td>1%<\/td><\/tr><tr><td>Company or Firm<\/td><td>2%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>No TDS<\/strong> if:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Single payment is less than &#x20B9;30,000<\/li>\n\n\n\n<li>Total payment in a year is less than &#x20B9;1 lakh<\/li>\n<\/ul>\n\n\n\n<h3 id=\"how-to-calculate-tds-under-section-194c\" class=\"wp-block-heading\"><strong>How to Calculate TDS Under Section 194C<\/strong><\/h3>\n\n\n\n<p><strong>Formula:<\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><strong>TDS = Total Payment &#xD7; TDS Rate<\/strong><\/p>\n<\/blockquote>\n\n\n\n<p><strong>Example 1:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You pay a contractor &#x20B9;1,00,000<\/li>\n\n\n\n<li>Contractor is an individual<\/li>\n\n\n\n<li>TDS = 1% of &#x20B9;1,00,000 = &#x20B9;1,000<\/li>\n\n\n\n<li>You pay &#x20B9;99,000 to contractor and &#x20B9;1,000 to the government as TDS<\/li>\n<\/ul>\n\n\n\n<p><strong>Example 2:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You hire a company for &#x20B9;2,00,000 work<\/li>\n\n\n\n<li>TDS = 2% of &#x20B9;2,00,000 = &#x20B9;4,000<\/li>\n<\/ul>\n\n\n\n<h3 id=\"tds-certificate-form-16a\" class=\"wp-block-heading\"><strong>TDS Certificate (<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/form-16a\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>Form 16A<\/a>)<\/strong><\/h3>\n\n\n\n<p>After deducting TDS, you must give the contractor a <strong>TDS certificate<\/strong> (Form 16A). This helps them claim credit for the tax paid on their behalf.<\/p>\n\n\n\n<h3 id=\"why-section-194c-is-important\" class=\"wp-block-heading\"><strong>Why Section 194C is Important<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Ensures tax is collected early<\/li>\n\n\n\n<li>Prevents tax evasion<\/li>\n\n\n\n<li>Keeps track of large contract payments<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Section 194C is a rule in the Indian <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/income-tax\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Income Tax<\/a> Act.It says that if a person or business pays a contractor, they must deduct TDS (Tax Deducted at Source) before making the payment. In simple words, it means: &#x201C;If you hire someone to do a job and pay them, you must first cut a small [&#x2026;]<\/p>\n","protected":false},"author":9,"featured_media":0,"menu_order":0,"template":"","meta":{"footnotes":""},"class_list":["post-7615","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/7615","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/9"}],"version-history":[{"count":1,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/7615\/revisions"}],"predecessor-version":[{"id":7616,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/7615\/revisions\/7616"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=7615"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}