What is the TDS rate for contractors under 194C?

Under Section 194C, the rate depends on who is receiving the payment. Payments to an individual or a Hindu Undivided Family attract a lower rate, while payments to any other entity such as a company or firm attract a slightly higher rate. There is a single-payment threshold and an aggregate annual threshold below which no TDS is required. Transport operators who furnish their PAN and meet the specified conditions can be exempt from deduction. Always confirm the exact current rate before deducting.

What happens if the payee does not give a PAN?

If the deductee does not furnish a valid PAN, TDS is deducted at a higher rate under Section 206AA, generally the rate specified in the relevant section or a flat higher rate, whichever is greater. This is a strong reason to collect and verify the PAN of every vendor, contractor and professional before you make a payment. A missing or wrong PAN not only raises the deduction but also causes the credit to not reflect correctly in the payee's Form 26AS.

Are TDS rates different for FY 2026-27?

TDS rates and thresholds are set by the Income Tax Act and can be revised in the annual Finance Act, so they should be checked against the latest official notification each year. The structure of sections stays broadly stable, but specific rates, thresholds and the list of covered payments can change. Treat any rate chart, including this one, as a general reference and confirm the precise figure that applies to your payment on the income tax department's website or with your tax advisor before deducting.

Is TDS deducted on the amount including GST?

Generally, when the GST component is shown separately on the invoice, TDS on the fee or payment is deducted on the value excluding that GST. For example, on a professional fee where GST is charged and shown separately, TDS is worked out on the base fee, not on the base plus GST. This treatment applies to fees and similar payments. Because interpretation can vary by payment type, keep your invoices clear with the tax shown separately so the deductible base is easy to identify.

What is Section 194Q about?

Section 194Q requires certain buyers to deduct TDS when they purchase goods above a specified annual value from a resident seller. It applies to buyers whose turnover crosses a threshold in the preceding year, and the deduction is made on the purchase value above the specified limit. It works alongside the tax-collected-at-source rules, and the law contains provisions to avoid the same transaction being hit twice. If your business buys goods in large volumes, check whether 194Q applies to you.

TDS Rate Chart for FY 2026-27: Section-Wise (India)

A TDS rate chart is the quick reference every accounts team keeps within reach. When you are about to pay a contractor, a consultant, a landlord or an agent, you need to know two things fast: does TDS apply, and at what rate. This section-wise guide for FY 2026-27 lays out the common sections, the type of payment each covers, the general rate and threshold, and the notes that trip people up. Because rates and thresholds can be revised in the annual Finance Act, treat this as a working reference and confirm the exact figure before you deduct.

How to read a TDS rate chart

Each TDS section covers a specific kind of payment, and comes with a threshold and a rate. The threshold is the amount below which no TDS is required, checked either per payment or on an aggregate annual basis. The rate is the percentage you withhold from the payment above the threshold. Rates can differ based on whether the payee is an individual or a company, and a missing PAN pushes the rate higher. For the concepts behind all of this, read our full TDS guide.

Section-wise TDS rate chart

The table below sets out the sections you will meet most often in day-to-day business. The rates shown are the general resident rates and the thresholds are indicative; verify the precise current values against the latest official notification for your specific payment.

Read the table as a starting map, not a final answer. The bands shown, for example the commission band under 194H, reflect that specific rates within a section can vary and can be revised, so always pin the exact figure before deducting. Where a rate has changed in recent Finance Acts, the official notification is the authority.

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Section 194C: contractors

This is one of the most-used sections. It covers payments to contractors and sub-contractors for carrying out any work, including transport, catering, job work and labour supply. The rate is lower when the payee is an individual or a Hindu Undivided Family, and higher for other entities. There is a single-payment threshold and a larger annual aggregate threshold, so even small repeated payments can cross the line over a year. Transport operators meeting the specified conditions and furnishing PAN may be exempt.

Section 194J: professionals

Section 194J applies to fees for professional services such as legal, medical, accountancy, engineering and consultancy, as well as fees for technical services and royalty. The general rate for professional fees is higher than the rate for pure technical services, which the law sets lower. If you engage consultants, designers, auditors or IT service providers, this is the section you will use most.

Section 194H: commission and brokerage

When you pay commission or brokerage to an agent, distributor or intermediary, 194H comes into play above the annual threshold. Note that this excludes insurance commission and brokerage on securities, which have their own sections. If your sales run through commission agents, build the deduction into your payout process so it is not forgotten at year-end.

Section 194I: rent

Rent paid for the use of assets is covered by 194I, with two rates: a lower rate for plant and machinery, and a higher rate for land, building and furniture. The threshold is an annual figure, so a monthly rent that looks small can cross it over twelve months. Individuals and HUFs not under audit have a separate rent TDS provision at a different rate for high-value rent, so check which applies to you.

Section 194Q: purchase of goods

A newer entrant, 194Q asks certain high-turnover buyers to deduct a small rate on the purchase of goods above a specified annual value from a resident seller. It sits alongside the tax-collected-at-source rules, and the law is written to prevent the same transaction from being taxed under both. If your business buys goods in volume, confirm whether your turnover brings you within 194Q and, if so, set up the deduction on purchases above the limit.

Section 194A: interest

When your business pays interest, other than interest on securities, Section 194A applies above the annual threshold. The most common example is interest on a loan from a person or a company, though bank and post office interest has its own higher threshold. If you have taken an unsecured loan from a director, a relative or a private lender and you pay interest on it, check whether you need to deduct under 194A before you release the payment. Interest paid without the required deduction is a frequent audit finding.

Lower or nil deduction certificates

Sometimes a payee's actual tax liability is far lower than the TDS that would be deducted, which locks up their cash until they claim a refund. To avoid this, a payee can apply to the income tax department for a lower or nil deduction certificate. If granted, it authorises the deductor to deduct at a reduced rate, or not at all, for the specified payments. As a deductor, if a vendor gives you a valid certificate, honour it and deduct at the rate stated on it, keeping a copy for your records. This is common with small contractors and professionals whose income falls below the taxable limit.

TDS versus TCS

People often mix up TDS with TCS. TDS is tax deducted by the payer before making a payment. TCS, or Tax Collected at Source, works the other way: it is collected by the seller from the buyer at the time of sale of certain specified goods, and then deposited with the government. Both create a credit that the other party claims in their return, but the direction is opposite. Section 194Q on purchase of goods, listed above, and the corresponding TCS provision on the sale of goods are designed to work together without double-taxing the same transaction.

Practical notes that save you money

Collect PAN first: A missing PAN pushes the rate up under Section 206AA, so verify PAN before you pay.
Watch the aggregate: Many thresholds are annual, so small repeated payments can quietly cross them.
Deduct on the right base: Where GST is shown separately, TDS on fees is generally on the value excluding that GST.
Deposit and file on time: Late deposit means interest, and late returns mean a daily fee.
Confirm the current rate: Rates can change each year, so match this chart against the latest official notification.

Keep this chart handy, but treat it as a guide rather than gospel. The sections and their logic stay steady; the exact rates and thresholds are the parts that move. When your billing and vendor records are organised, applying the right section becomes routine. See our GST billing software to keep invoices and payments in one place, and check what GST actually means if you are new to Indian tax terms.