I pay a fabricator to make parts to my drawings and I pay lorry owners to move my goods. Do I deduct under section 194C, at what rate, and at what figure does the obligation start — is it thirty thousand rupees or one lakh?
Both figures are live and they do different jobs. Section 194C(5) says no deduction is to be made where the single sum credited or paid does not exceed thirty thousand rupees, and its proviso says that once the aggregate of such sums in the financial year exceeds one lakh rupees you must deduct under the section anyway. So a single bill of Rs 35,000 is caught on its own, and a run of Rs 12,000 bills is caught the moment the year's total passes Rs 1,00,000. The rate is one per cent where the payee is an individual or a Hindu undivided family and two per cent in every other case. Whether the fabrication is "work" at all depends on whose material is used: manufacturing to your specification out of material bought from you (or from an associate of yours) is "work"; the same job done out of material the fabricator bought from anyone else is expressly excluded, and that exclusion is the line between section 194C and a contract for sale. All of this is the 1961 Act, which the CBDT's own transition FAQ says stands repealed on 1 April 2026: for a credit or payment on or after that date the corresponding provision is section 393(1) of the Income-tax Act, 2025, which carries the same rates and the same two figures.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-10-01, reported as Section 194C of the Income-tax Act, 1961, as amended up to 2026. It bears on section 194C, section 194C(1), section 194C(5), section 194C(6), section 194C(3), section 194C(7), section 194J, section 194Q, section 194-I, section 44AE, section 40A(2)(b), section 44AB, section 201, section 393 (Act of 2025) of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
Two errors account for most section 194C demands, and both are errors about the two figures in sub-section (5). The first is treating thirty thousand rupees as the only test and deducting nothing on a year of Rs 15,000 bills that add up to Rs 1.8 lakh; the proviso catches that, and it catches it for the whole year, not merely for the bill that crossed the line. The second is the opposite — treating one lakh rupees as the only test and letting a single Rs 60,000 bill go, when sub-section (5) bites on that bill by itself. Neither figure has moved for a long time: Rs 30,000 since 1 July 2010 and Rs 1,00,000 since 1 June 2016. If a software setting, a circular note or an opinion tells you the aggregate is Rs 75,000, it is reading the law as it stood before 1 June 2016; if it tells you the single payment is Rs 20,000, it is reading the law as it stood before 1 July 2010; and if it tells you either figure changed in 2025, it is simply wrong. The definition of "work" is where the money usually is, because it decides whether there was any obligation at all. A fabricator who makes parts to your drawings out of steel he bought himself is not doing "work" for you — Explanation (iv)(A) says so in terms — and a section 201 demand raised on those payments should not survive the clause being put in front of the officer. Reverse the material and the answer reverses: if he is converting steel you sold him, it is "work", and sub-section (3) then decides the base — invoice value less the separately stated material value if he states it, the whole invoice if he does not, which is a reason to insist that your contractors bill the two elements separately. Since 1 April 2020 the customer's "associate", as measured by section 40A(2)(b), is treated as the customer for both limbs, so routing the material sale through a group company no longer takes the job out of the section. And the transporter exemption in sub-section (6) is narrower than it is usually remembered: since 1 June 2015 a PAN alone is not enough, the contractor must own ten or fewer goods carriages and must give you a signed declaration to that effect, and you must still report the payment under sub-section (7).
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
Read aloud by your device. Press again to stop.
As printed identically on the Year 2026, Year 2025 and Year 2024 (No. 2) departmental pages, section 194C reads: (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to— (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source— (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed thirty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds one lakh rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. Explanation.—For the purposes of this section,— (i) "specified person" shall mean,— (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or (k) any firm; or (l) any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person,— (A) does not fall under any of the preceding sub-clauses; and (B) has total sales, gross receipts or turnover from business or profession carried on by him exceeding one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor; (ii) "goods carriage" shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE; (iii) "contract" shall include sub-contract; (iv) "work" shall include— (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer or its associate, being a person placed similarly in relation to such customer as is the person placed in relation to the assessee under the provisions contained in clause (b) of sub-section (2) of section 40A, but does not include— (A) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer or associate of such customer; or (B) any sum referred to in sub-section (1) of section 194J.
As the section stands from 1 October 2024, and as printed on the Year 2026 departmental page: Who deducts. Any person responsible for paying a sum to a resident contractor for carrying out any work, including supply of labour for carrying out any work, in pursuance of a contract between that contractor and a "specified person" as Explanation clause (i) defines it. An individual or HUF is a specified person only where he does not fall in any earlier sub-clause and his total sales, gross receipts or turnover exceeded one crore rupees in business or fifty lakh rupees in profession in the immediately preceding financial year — a turnover test substituted for the old section 44AB audit test by Act No. 12 of 2020 with effect from 1 April 2020. Sub-section (4) takes an individual or HUF out altogether where the sum is credited or paid exclusively for personal purposes. Rates. One per cent where the payment or credit is to an individual or a Hindu undivided family; two per cent where it is to anyone else. That two-rate structure came in when the whole section was substituted by the Finance (No. 2) Act, 2009 with effect from 1 October 2009, and has not changed since. The two thresholds. Sub-section (5) sets a single-payment figure of thirty thousand rupees and its proviso an annual aggregate figure of one lakh rupees. The thirty thousand rupee figure last changed on 1 July 2010, when the Finance Act, 2010 substituted "thirty" for "twenty". The aggregate figure last changed on 1 June 2016, when Act No. 28 of 2016 substituted "one lakh" for "seventy-five thousand" — itself substituted for "fifty" thousand by the Finance Act, 2010 with effect from 1 July 2010. Neither figure moved in 2024, 2025 or 2026: the Year 2024 (No. 1), Year 2024 (No. 2), Year 2025 and Year 2026 pages of the section all print the same two figures, and so does section 393(1), Table, Serial No. 6(i) of the Income-tax Act, 2025. What "work" is. Explanation clause (iv) makes "work" include advertising; broadcasting and telecasting including production of programmes; carriage of goods or passengers by any mode of transport other than by railways; catering; and manufacturing or supplying a product to the customer's requirement or specification using material purchased from that customer or its associate. It then excludes, in item (A), the same manufacture or supply done with material purchased from anyone other than that customer or the customer's associate, and, in item (B), any sum referred to in section 194J(1). The "or its associate" words in sub-clause (e), and the matching words "or associate of such customer" in the exclusion, were put in by Act No. 12 of 2020 with effect from 1 April 2020. Item (B), and the lettering of the exclusion as (A) and (B), were put in by the substitution of the closing words of clause (iv) by Act No. 15 of 2024 with effect from 1 October 2024; before that date the exclusion was a single unlettered sentence and nothing in the section expressly subordinated it to section 194J. The invoice-value rule. Where the work is of the sub-clause (e) kind — that is, the customer's own material is used — sub-section (3) requires deduction on the invoice value excluding the value of material if that value is stated separately in the invoice, and on the whole of the invoice value if it is not. Transporters. Sub-section (6) bars deduction on a sum paid during the previous year to a contractor in the business of plying, hiring or leasing goods carriages where he owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number. It took that form on 1 June 2015, when the Finance Act, 2015 (Act No. 20 of 2015) substituted the ten-carriage and declaration words for the earlier "on furnishing of"; until then the exemption ran to any goods-carriage contractor who simply gave his PAN, with no fleet limit and no declaration. "Goods carriage" takes its meaning from the Explanation to section 44AE(7). Sub-section (7) obliges the payer who has not deducted under sub-section (6) to furnish the prescribed particulars to the prescribed income-tax authority in the prescribed form and time. Which section prevails. Against section 194J, the statute now decides it: from 1 October 2024 a sum referred to in section 194J(1) is not "work" at all, so section 194J governs and section 194C cannot. Against section 194Q, sub-section (5) of that section reads: "The provisions of this section shall not apply to a transaction on which—(a) tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies." The two clauses are joined by "and", and whether clause (a) on its own is enough to displace section 194Q is a question the words do not settle; clause (a) is read as sufficient in practice, so a payment that is genuinely for "work" is treated as outside section 194Q. The corollary does not depend on that reading and matters more: a job that Explanation (iv)(A) pushes out of "work" because the maker bought the material from a third party is a purchase of goods, which is exactly where section 194Q can apply. Against section 194-I there is no statutory tie-breaker in either section; the Explanation to section 194-I defines "rent" as payment under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of land, building, machinery, plant, equipment, furniture or fittings, whether or not owned by the payee, so the question is factual — carriage of goods for a price is "work" under Explanation (iv)(c), while putting a vehicle or a machine at the payer's disposal is use of plant or equipment and is rent. The width of "any work". In Associated Cement Company Ltd v Commissioner of Income-tax (Supreme Court, 23 March 1993), decided on the pre-2009 text, the Court held that any work means any work and not a works-contract, which has a special connotation in the tax law, and that the work envisaged in the sub-section has wide import and covers any work which one or the other of the specified organisations can get carried out through a contractor under a contract. That construction of the opening words survives the 2009 substitution, which kept the phrase "carrying out any work (including supply of labour for carrying out any work)" intact, but it is now read with an Explanation that did not exist in 1993 and that now takes two categories out of "work" expressly. How long this text governs. The CBDT's transition FAQ states that the 1961 Act stands repealed on 1 April 2026 and that the Act governing a TDS obligation depends on which of credit or payment happens first: where that earlier event falls on or before 31 March 2026 the 1961 Act applies, and where it falls on or after 1 April 2026 the Income-tax Act, 2025 applies. The corresponding provision there is section 393(1), Table, Serial No. 6(i), which carries the same one and two per cent rates and the same Rs 30,000 and Rs 1,00,000 figures.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved.
but does not include— (A) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer or associate of such customer; or (B) any sum referred to in sub-section (1) of section 194J.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppBoth figures are live and they do different jobs. Section 194C(5) says no deduction is to be made where the single sum credited or paid does not exceed thirty thousand rupees, and its proviso says that once the aggregate of such sums in the financial year exceeds one lakh rupees you must deduct under the section anyway. So a single bill of Rs 35,000 is caught on its own, and a run of Rs 12,000 bills is caught the moment the year's total passes Rs 1,00,000. The rate is one per cent where the payee is an individual or a Hindu undivided family and two per cent in every other case. Whether the fabrication is "work" at all depends on whose material is used: manufacturing to your specification out of material bought from you (or from an associate of yours) is "work"; the same job done out of material the fabricator bought from anyone else is expressly excluded, and that exclusion is the line between section 194C and a contract for sale. All of this is the 1961 Act, which the CBDT's own transition FAQ says stands repealed on 1 April 2026: for a credit or payment on or after that date the corresponding provision is section 393(1) of the Income-tax Act, 2025, which carries the same rates and the same two figures. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 194C, section 194C(1), section 194C(5), section 194C(6), section 194C(3), section 194C(7), section 194J, section 194Q, section 194-I, section 44AE, section 40A(2)(b), section 44AB, section 201, section 393 (Act of 2025) of the Income Tax Act 1961. It is reported as Section 194C of the Income-tax Act, 1961, as amended up to 2026. Two errors account for most section 194C demands, and both are errors about the two figures in sub-section (5). The first is treating thirty thousand rupees as the only test and deducting nothing on a year of Rs 15,000 bills that add up to Rs 1.8 lakh; the proviso catches that, and it catches it for the whole year, not merely for the bill that crossed the line. The second is the opposite — treating one lakh rupees as the only test and letting a single Rs 60,000 bill go, when sub-section (5) bites on that bill by itself. Neither figure has moved for a long time: Rs 30,000 since 1 July 2010 and Rs 1,00,000 since 1 June 2016. If a software setting, a circular note or an opinion tells you the aggregate is Rs 75,000, it is reading the law as it stood before 1 June 2016; if it tells you the single payment is Rs 20,000, it is reading the law as it stood before 1 July 2010; and if it tells you either figure changed in 2025, it is simply wrong. The definition of "work" is where the money usually is, because it decides whether there was any obligation at all. A fabricator who makes parts to your drawings out of steel he bought himself is not doing "work" for you — Explanation (iv)(A) says so in terms — and a section 201 demand raised on those payments should not survive the clause being put in front of the officer. Reverse the material and the answer reverses: if he is converting steel you sold him, it is "work", and sub-section (3) then decides the base — invoice value less the separately stated material value if he states it, the whole invoice if he does not, which is a reason to insist that your contractors bill the two elements separately. Since 1 April 2020 the customer's "associate", as measured by section 40A(2)(b), is treated as the customer for both limbs, so routing the material sale through a group company no longer takes the job out of the section. And the transporter exemption in sub-section (6) is narrower than it is usually remembered: since 1 June 2015 a PAN alone is not enough, the contractor must own ten or fewer goods carriages and must give you a signed declaration to that effect, and you must still report the payment under sub-section (7). If it applies to you, the first step is this: Apply both limbs of sub-section (5) to every vendor, every year: deduct on any single credit or payment above Rs 30,000, and start deducting on everything once the year's aggregate for that contractor passes Rs 1,00,000.
As printed identically on the Year 2026, Year 2025 and Year 2024 (No. 2) departmental pages, section 194C reads: (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to— (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source— (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed thirty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds one lakh rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. Explanation.—For the purposes of this section,— (i) "specified person" shall mean,— (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or (k) any firm; or (l) any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person,— (A) does not fall under any of the preceding sub-clauses; and (B) has total sales, gross receipts or turnover from business or profession carried on by him exceeding one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor; (ii) "goods carriage" shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE; (iii) "contract" shall include sub-contract; (iv) "work" shall include— (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer or its associate, being a person placed similarly in relation to such customer as is the person placed in relation to the assessee under the provisions contained in clause (b) of sub-section (2) of section 40A, but does not include— (A) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer or associate of such customer; or (B) any sum referred to in sub-section (1) of section 194J. The matter was decided on 2024-10-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. As the section stands from 1 October 2024, and as printed on the Year 2026 departmental page: Who deducts. Any person responsible for paying a sum to a resident contractor for carrying out any work, including supply of labour for carrying out any work, in pursuance of a contract between that contractor and a "specified person" as Explanation clause (i) defines it. An individual or HUF is a specified person only where he does not fall in any earlier sub-clause and his total sales, gross receipts or turnover exceeded one crore rupees in business or fifty lakh rupees in profession in the immediately preceding financial year — a turnover test substituted for the old section 44AB audit test by Act No. 12 of 2020 with effect from 1 April 2020. Sub-section (4) takes an individual or HUF out altogether where the sum is credited or paid exclusively for personal purposes. Rates. One per cent where the payment or credit is to an individual or a Hindu undivided family; two per cent where it is to anyone else. That two-rate structure came in when the whole section was substituted by the Finance (No. 2) Act, 2009 with effect from 1 October 2009, and has not changed since. The two thresholds. Sub-section (5) sets a single-payment figure of thirty thousand rupees and its proviso an annual aggregate figure of one lakh rupees. The thirty thousand rupee figure last changed on 1 July 2010, when the Finance Act, 2010 substituted "thirty" for "twenty". The aggregate figure last changed on 1 June 2016, when Act No. 28 of 2016 substituted "one lakh" for "seventy-five thousand" — itself substituted for "fifty" thousand by the Finance Act, 2010 with effect from 1 July 2010. Neither figure moved in 2024, 2025 or 2026: the Year 2024 (No. 1), Year 2024 (No. 2), Year 2025 and Year 2026 pages of the section all print the same two figures, and so does section 393(1), Table, Serial No. 6(i) of the Income-tax Act, 2025. What "work" is. Explanation clause (iv) makes "work" include advertising; broadcasting and telecasting including production of programmes; carriage of goods or passengers by any mode of transport other than by railways; catering; and manufacturing or supplying a product to the customer's requirement or specification using material purchased from that customer or its associate. It then excludes, in item (A), the same manufacture or supply done with material purchased from anyone other than that customer or the customer's associate, and, in item (B), any sum referred to in section 194J(1). The "or its associate" words in sub-clause (e), and the matching words "or associate of such customer" in the exclusion, were put in by Act No. 12 of 2020 with effect from 1 April 2020. Item (B), and the lettering of the exclusion as (A) and (B), were put in by the substitution of the closing words of clause (iv) by Act No. 15 of 2024 with effect from 1 October 2024; before that date the exclusion was a single unlettered sentence and nothing in the section expressly subordinated it to section 194J. The invoice-value rule. Where the work is of the sub-clause (e) kind — that is, the customer's own material is used — sub-section (3) requires deduction on the invoice value excluding the value of material if that value is stated separately in the invoice, and on the whole of the invoice value if it is not. Transporters. Sub-section (6) bars deduction on a sum paid during the previous year to a contractor in the business of plying, hiring or leasing goods carriages where he owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number. It took that form on 1 June 2015, when the Finance Act, 2015 (Act No. 20 of 2015) substituted the ten-carriage and declaration words for the earlier "on furnishing of"; until then the exemption ran to any goods-carriage contractor who simply gave his PAN, with no fleet limit and no declaration. "Goods carriage" takes its meaning from the Explanation to section 44AE(7). Sub-section (7) obliges the payer who has not deducted under sub-section (6) to furnish the prescribed particulars to the prescribed income-tax authority in the prescribed form and time. Which section prevails. Against section 194J, the statute now decides it: from 1 October 2024 a sum referred to in section 194J(1) is not "work" at all, so section 194J governs and section 194C cannot. Against section 194Q, sub-section (5) of that section reads: "The provisions of this section shall not apply to a transaction on which—(a) tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies." The two clauses are joined by "and", and whether clause (a) on its own is enough to displace section 194Q is a question the words do not settle; clause (a) is read as sufficient in practice, so a payment that is genuinely for "work" is treated as outside section 194Q. The corollary does not depend on that reading and matters more: a job that Explanation (iv)(A) pushes out of "work" because the maker bought the material from a third party is a purchase of goods, which is exactly where section 194Q can apply. Against section 194-I there is no statutory tie-breaker in either section; the Explanation to section 194-I defines "rent" as payment under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of land, building, machinery, plant, equipment, furniture or fittings, whether or not owned by the payee, so the question is factual — carriage of goods for a price is "work" under Explanation (iv)(c), while putting a vehicle or a machine at the payer's disposal is use of plant or equipment and is rent. The width of "any work". In Associated Cement Company Ltd v Commissioner of Income-tax (Supreme Court, 23 March 1993), decided on the pre-2009 text, the Court held that any work means any work and not a works-contract, which has a special connotation in the tax law, and that the work envisaged in the sub-section has wide import and covers any work which one or the other of the specified organisations can get carried out through a contractor under a contract. That construction of the opening words survives the 2009 substitution, which kept the phrase "carrying out any work (including supply of labour for carrying out any work)" intact, but it is now read with an Explanation that did not exist in 1993 and that now takes two categories out of "work" expressly. How long this text governs. The CBDT's transition FAQ states that the 1961 Act stands repealed on 1 April 2026 and that the Act governing a TDS obligation depends on which of credit or payment happens first: where that earlier event falls on or before 31 March 2026 the 1961 Act applies, and where it falls on or after 1 April 2026 the Income-tax Act, 2025 applies. The corresponding provision there is section 393(1), Table, Serial No. 6(i), which carries the same one and two per cent rates and the same Rs 30,000 and Rs 1,00,000 figures.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "but does not include— (A) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer or associate of such customer; or (B) any sum referred to in sub-section (1) of section 194J."
It was decided by the CBDT Circulars & Instructions on 2024-10-01 and is reported as Section 194C of the Income-tax Act, 1961, as amended up to 2026. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 194C, section 194C(1), section 194C(5), section 194C(6), section 194C(3), section 194C(7), section 194J, section 194Q, section 194-I, section 44AE, section 40A(2)(b), section 44AB, section 201, section 393 (Act of 2025), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. As the section stands from 1 October 2024, and as printed on the Year 2026 departmental page: Who deducts. Any person responsible for paying a sum to a resident contractor for carrying out any work, including supply of labour for carrying out any work, in pursuance of a contract between that contractor and a "specified person" as Explanation clause (i) defines it. An individual or HUF is a specified person only where he does not fall in any earlier sub-clause and his total sales, gross receipts or turnover exceeded one crore rupees in business or fifty lakh rupees in profession in the immediately preceding financial year — a turnover test substituted for the old section 44AB audit test by Act No. 12 of 2020 with effect from 1 April 2020. Sub-section (4) takes an individual or HUF out altogether where the sum is credited or paid exclusively for personal purposes. Rates. One per cent where the payment or credit is to an individual or a Hindu undivided family; two per cent where it is to anyone else. That two-rate structure came in when the whole section was substituted by the Finance (No. 2) Act, 2009 with effect from 1 October 2009, and has not changed since. The two thresholds. Sub-section (5) sets a single-payment figure of thirty thousand rupees and its proviso an annual aggregate figure of one lakh rupees. The thirty thousand rupee figure last changed on 1 July 2010, when the Finance Act, 2010 substituted "thirty" for "twenty". The aggregate figure last changed on 1 June 2016, when Act No. 28 of 2016 substituted "one lakh" for "seventy-five thousand" — itself substituted for "fifty" thousand by the Finance Act, 2010 with effect from 1 July 2010. Neither figure moved in 2024, 2025 or 2026: the Year 2024 (No. 1), Year 2024 (No. 2), Year 2025 and Year 2026 pages of the section all print the same two figures, and so does section 393(1), Table, Serial No. 6(i) of the Income-tax Act, 2025. What "work" is. Explanation clause (iv) makes "work" include advertising; broadcasting and telecasting including production of programmes; carriage of goods or passengers by any mode of transport other than by railways; catering; and manufacturing or supplying a product to the customer's requirement or specification using material purchased from that customer or its associate. It then excludes, in item (A), the same manufacture or supply done with material purchased from anyone other than that customer or the customer's associate, and, in item (B), any sum referred to in section 194J(1). The "or its associate" words in sub-clause (e), and the matching words "or associate of such customer" in the exclusion, were put in by Act No. 12 of 2020 with effect from 1 April 2020. Item (B), and the lettering of the exclusion as (A) and (B), were put in by the substitution of the closing words of clause (iv) by Act No. 15 of 2024 with effect from 1 October 2024; before that date the exclusion was a single unlettered sentence and nothing in the section expressly subordinated it to section 194J. The invoice-value rule. Where the work is of the sub-clause (e) kind — that is, the customer's own material is used — sub-section (3) requires deduction on the invoice value excluding the value of material if that value is stated separately in the invoice, and on the whole of the invoice value if it is not. Transporters. Sub-section (6) bars deduction on a sum paid during the previous year to a contractor in the business of plying, hiring or leasing goods carriages where he owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number. It took that form on 1 June 2015, when the Finance Act, 2015 (Act No. 20 of 2015) substituted the ten-carriage and declaration words for the earlier "on furnishing of"; until then the exemption ran to any goods-carriage contractor who simply gave his PAN, with no fleet limit and no declaration. "Goods carriage" takes its meaning from the Explanation to section 44AE(7). Sub-section (7) obliges the payer who has not deducted under sub-section (6) to furnish the prescribed particulars to the prescribed income-tax authority in the prescribed form and time. Which section prevails. Against section 194J, the statute now decides it: from 1 October 2024 a sum referred to in section 194J(1) is not "work" at all, so section 194J governs and section 194C cannot. Against section 194Q, sub-section (5) of that section reads: "The provisions of this section shall not apply to a transaction on which—(a) tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies." The two clauses are joined by "and", and whether clause (a) on its own is enough to displace section 194Q is a question the words do not settle; clause (a) is read as sufficient in practice, so a payment that is genuinely for "work" is treated as outside section 194Q. The corollary does not depend on that reading and matters more: a job that Explanation (iv)(A) pushes out of "work" because the maker bought the material from a third party is a purchase of goods, which is exactly where section 194Q can apply. Against section 194-I there is no statutory tie-breaker in either section; the Explanation to section 194-I defines "rent" as payment under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of land, building, machinery, plant, equipment, furniture or fittings, whether or not owned by the payee, so the question is factual — carriage of goods for a price is "work" under Explanation (iv)(c), while putting a vehicle or a machine at the payer's disposal is use of plant or equipment and is rent. The width of "any work". In Associated Cement Company Ltd v Commissioner of Income-tax (Supreme Court, 23 March 1993), decided on the pre-2009 text, the Court held that any work means any work and not a works-contract, which has a special connotation in the tax law, and that the work envisaged in the sub-section has wide import and covers any work which one or the other of the specified organisations can get carried out through a contractor under a contract. That construction of the opening words survives the 2009 substitution, which kept the phrase "carrying out any work (including supply of labour for carrying out any work)" intact, but it is now read with an Explanation that did not exist in 1993 and that now takes two categories out of "work" expressly. How long this text governs. The CBDT's transition FAQ states that the 1961 Act stands repealed on 1 April 2026 and that the Act governing a TDS obligation depends on which of credit or payment happens first: where that earlier event falls on or before 31 March 2026 the 1961 Act applies, and where it falls on or after 1 April 2026 the Income-tax Act, 2025 applies. The corresponding provision there is section 393(1), Table, Serial No. 6(i), which carries the same one and two per cent rates and the same Rs 30,000 and Rs 1,00,000 figures. It arises in TDS Defaults and How Tax Law Is Read matters, on section 194C, section 194C(1), section 194C(5), section 194C(6), section 194C(3), section 194C(7), section 194J, section 194Q, section 194-I, section 44AE, section 40A(2)(b), section 44AB, section 201, section 393 (Act of 2025) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Fix the payee's status before you fix the rate. One per cent only for an individual or a Hindu undivided family; two per cent for a firm, LLP, company, AOP, society or trust. Get it from the PAN and the invoice, not from the trade name. Check you are a "specified person" at all. If you are an individual or an HUF, you are inside the section only if your preceding year's turnover exceeded one crore rupees in business or fifty lakh rupees in profession, and never for a payment made exclusively for personal purposes. For anything made to your specification, put the material question first: whose material was it? If the maker bought it from anyone other than you or your section 40A(2)(b) associate, Explanation (iv)(A) takes it out of "work" and section 194C does not apply — quote the clause. Where it is your material, require the contractor to state the material value separately on the invoice. Under sub-section (3) that is what keeps the deduction off the material; if it is not stated separately you must deduct on the whole invoice. Before applying section 194C to a professional or technical bill, check section 194J(1). From 1 October 2024 a sum referred to in section 194J(1) is excluded from "work" outright, so the two sections can no longer both be in play. Take a written declaration from every small transporter, on which he states he owns ten or fewer goods carriages at any time during the previous year, and record his PAN. A PAN alone has not been enough since 1 June 2015. Still report the transporter payments. Sub-section (6) removes the deduction, not the reporting: sub-section (7) requires the prescribed particulars in the prescribed form and time. If the arrangement is really the hire of a vehicle or a machine placed at your disposal rather than a service of carriage, test it against the Explanation to section 194-I before defaulting to section 194C. For a credit or payment on or after 1 April 2026, stop citing section 194C and work from section 393(1), Table, Serial No. 6(i) of the Income-tax Act, 2025. For anything on or before 31 March 2026, section 194C still governs, including in a later section 201 proceeding.
Still good law. The text stated here is section 194C as printed on the departmental page stamped Year 2026, read on 23 September 2026. Four dated vintages — Year 2024 (No. 1), Year 2024 (No. 2), Year 2025 and Year 2026 — print it identically, so nothing has displaced the 1 October 2024 position. The two thresholds are confirmed three ways: those four vintages of the section; the Year 2015 page, which still prints "seventy-five thousand", read against the Year 2016 page, which carries the footnote substituting "one lakh" for it; and section 393(1), Table, Serial No. 6(i) of the Income-tax Act, 2025, which carries the same Rs 30,000 and Rs 1,00,000. The departmental "Threshold limits under Income-tax Act" page prints the same two figures, but it is deliberately not counted as a fourth: that page is out of date for section 194J, whose threshold rose to fifty thousand rupees on 1 April 2025, so it is not evidence that anything on it is current. Three things are open. The enacted Finance (No. 2) Act, 2024 could not be read past clause 44, so the amending clause itself was not read; the 1 October 2024 change rests on the departmental footnotes, which quote the superseded words, and on the Bill’s arrangement of clauses, which lists "53. Amendment of section 194C". The amending statutes are given by the Act numbers the footnotes print — Act No. 12 of 2020 and Act No. 28 of 2016 — and neither enacted Act was opened to confirm its popular name. No current-vintage page of section 194J or section 194-I could be opened, so no rate or threshold of either section is stated here. For a credit or payment on or after 1 April 2026 this section no longer governs: the CBDT transition FAQ states that the 1961 Act stands repealed on that date, and the corresponding provision is section 393(1) of the Income-tax Act, 2025. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The statutory text in the record was transcribed from the current published text, which prints "Income-tax Act, 1961" and the marginal note "Payments to contractors", and is identical word for word to the two editions before it. Thirteen editions, running from 2013 to the current one, were compared, and each was checked for the Act it prints before anything was taken from it. The footnotes, verbatim as they are printed. On the 2024 edition, footnote 89, on the closing words of Explanation clause (iv): "Sub. by the Act No. 15 of 2024, w.e.f. 1-10-2024. Prior to its substitution, the long line, as amended by the Act No. 12 of 2020, w.e.f 1-4-2020, read as under: ‘but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer or associate of such customer.’" On the 2016 edition, footnote 5, on "one lakh": "Sub. for ‘seventy-five thousand’ by Act No. 28 of 2016 (w.e.f. 1-6-2016)." Footnote 6, on sub-section (6): "Sub. for ‘on furnishing of’ by Act No. 20 of 2015 (w.e.f. 1-6-2015)." On the 2014 edition, footnote 86, on "thirty" in sub-section (5): "Substituted for ‘twenty’ by the Finance Act, 2010, w.e.f. 1-7-2010"; footnote 87: "Substituted for ‘fifty’, by the Finance Act, 2010, w.e.f. 1-7-2010"; footnote 83 records the whole section as "Substituted by the Finance (No. 2) Act, 2009, w.e.f. 1-10-2009." Explanation clause (iv) has had three shapes, and the lettering is where citations go wrong. To 31 March 2020 sub-clause (e) ended at "material purchased from such customer" and the exclusion was a single unlettered sentence. From 1 April 2020 the associate words went into both limbs, still unlettered. Only from 1 October 2024 is the exclusion lettered (A) and (B). A citation to "Explanation (iv)(A)" is therefore meaningless for a payment before 1 October 2024, and item (B) does not exist before that date. The date on this record is that commencement date, not a decision date, and there is no bench because there is no decision behind it. Associated Cement was read in two independent reproductions of the judgment text, the Court’s own words only in both cases. Both print "Any work means any work and not a works-contract, which has a special connotation in the tax law" and the "wide import" sentence, which ends "through a contractor under a contract". A third sentence, beginning "There is nothing in sub-section (1) of Section 194C", was dropped from this record: it appears in one reproduction only, and there only as damaged text. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
As the section stands from 1 October 2024, and as printed on the Year 2026 departmental page: Who deducts. Any person responsible for paying a sum to a resident contractor for carrying out any work, including supply of labour for carrying out any work, in pursuance of a contract between that contractor and a "specified person" as Explanation clause (i) defines it. An individual or HUF is a specified person only where he does not fall in any earlier sub-clause and his total sales, gross receipts or turnover exceeded one crore rupees in business or fifty lakh rupees in profession in the immediately preceding financial year — a turnover test substituted for the old section 44AB audit test by Act No. 12 of 2020 with effect from 1 April 2020. Sub-section (4) takes an individual or HUF out altogether where the sum is credited or paid exclusively for personal purposes. Rates. One per cent where the payment or credit is to an individual or a Hindu undivided family; two per cent where it is to anyone else. That two-rate structure came in when the whole section was substituted by the Finance (No. 2) Act, 2009 with effect from 1 October 2009, and has not changed since. The two thresholds. Sub-section (5) sets a single-payment figure of thirty thousand rupees and its proviso an annual aggregate figure of one lakh rupees. The thirty thousand rupee figure last changed on 1 July 2010, when the Finance Act, 2010 substituted "thirty" for "twenty". The aggregate figure last changed on 1 June 2016, when Act No. 28 of 2016 substituted "one lakh" for "seventy-five thousand" — itself substituted for "fifty" thousand by the Finance Act, 2010 with effect from 1 July 2010. Neither figure moved in 2024, 2025 or 2026: the Year 2024 (No. 1), Year 2024 (No. 2), Year 2025 and Year 2026 pages of the section all print the same two figures, and so does section 393(1), Table, Serial No. 6(i) of the Income-tax Act, 2025. What "work" is. Explanation clause (iv) makes "work" include advertising; broadcasting and telecasting including production of programmes; carriage of goods or passengers by any mode of transport other than by railways; catering; and manufacturing or supplying a product to the customer's requirement or specification using material purchased from that customer or its associate. It then excludes, in item (A), the same manufacture or supply done with material purchased from anyone other than that customer or the customer's associate, and, in item (B), any sum referred to in section 194J(1). The "or its associate" words in sub-clause (e), and the matching words "or associate of such customer" in the exclusion, were put in by Act No. 12 of 2020 with effect from 1 April 2020. Item (B), and the lettering of the exclusion as (A) and (B), were put in by the substitution of the closing words of clause (iv) by Act No. 15 of 2024 with effect from 1 October 2024; before that date the exclusion was a single unlettered sentence and nothing in the section expressly subordinated it to section 194J. The invoice-value rule. Where the work is of the sub-clause (e) kind — that is, the customer's own material is used — sub-section (3) requires deduction on the invoice value excluding the value of material if that value is stated separately in the invoice, and on the whole of the invoice value if it is not. Transporters. Sub-section (6) bars deduction on a sum paid during the previous year to a contractor in the business of plying, hiring or leasing goods carriages where he owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number. It took that form on 1 June 2015, when the Finance Act, 2015 (Act No. 20 of 2015) substituted the ten-carriage and declaration words for the earlier "on furnishing of"; until then the exemption ran to any goods-carriage contractor who simply gave his PAN, with no fleet limit and no declaration. "Goods carriage" takes its meaning from the Explanation to section 44AE(7). Sub-section (7) obliges the payer who has not deducted under sub-section (6) to furnish the prescribed particulars to the prescribed income-tax authority in the prescribed form and time. Which section prevails. Against section 194J, the statute now decides it: from 1 October 2024 a sum referred to in section 194J(1) is not "work" at all, so section 194J governs and section 194C cannot. Against section 194Q, sub-section (5) of that section reads: "The provisions of this section shall not apply to a transaction on which—(a) tax is deductible under any of the provisions of this Act; and (b) tax is collectible under the provisions of section 206C other than a transaction to which sub-section (1H) of section 206C applies." The two clauses are joined by "and", and whether clause (a) on its own is enough to displace section 194Q is a question the words do not settle; clause (a) is read as sufficient in practice, so a payment that is genuinely for "work" is treated as outside section 194Q. The corollary does not depend on that reading and matters more: a job that Explanation (iv)(A) pushes out of "work" because the maker bought the material from a third party is a purchase of goods, which is exactly where section 194Q can apply. Against section 194-I there is no statutory tie-breaker in either section; the Explanation to section 194-I defines "rent" as payment under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of land, building, machinery, plant, equipment, furniture or fittings, whether or not owned by the payee, so the question is factual — carriage of goods for a price is "work" under Explanation (iv)(c), while putting a vehicle or a machine at the payer's disposal is use of plant or equipment and is rent. The width of "any work". In Associated Cement Company Ltd v Commissioner of Income-tax (Supreme Court, 23 March 1993), decided on the pre-2009 text, the Court held that any work means any work and not a works-contract, which has a special connotation in the tax law, and that the work envisaged in the sub-section has wide import and covers any work which one or the other of the specified organisations can get carried out through a contractor under a contract. That construction of the opening words survives the 2009 substitution, which kept the phrase "carrying out any work (including supply of labour for carrying out any work)" intact, but it is now read with an Explanation that did not exist in 1993 and that now takes two categories out of "work" expressly. How long this text governs. The CBDT's transition FAQ states that the 1961 Act stands repealed on 1 April 2026 and that the Act governing a TDS obligation depends on which of credit or payment happens first: where that earlier event falls on or before 31 March 2026 the 1961 Act applies, and where it falls on or after 1 April 2026 the Income-tax Act, 2025 applies. The corresponding provision there is section 393(1), Table, Serial No. 6(i), which carries the same one and two per cent rates and the same Rs 30,000 and Rs 1,00,000 figures.
TaxSphere, “Statutory position — s.194C: one per cent for an individual or HUF and two per cent for everyone else, the thirty thousand and one lakh thresholds, and the material-bought-from-a-third-party carve-out that takes a contract outside "work"”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-194c-the-two-thresholds-and-what-work-excludes/ (validity last checked 2026-09-23)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
The Assessing Officer has disallowed 30 per cent of my purchases under s.40(a)(ia) for not deducting s.194Q TDS, but the seller had already collected TCS under s.206C(1H) and it shows in my Form 26AS. Does that answer the disallowance?
My contract is only for loading bags, not a works contract, and much of what I pay is reimbursement of the contractor's wage bill. Must I still deduct under section 194C on the whole sum?
I am a transport contractor who hires trucks from individual owners and pays them freight. Does section 194C apply, and can section 40(a)(ia) disallow amounts I have already paid rather than merely owe?
We book rooms and banquet facilities for staff and clients and the hotel bills us monthly. Is that a contract for work on which we have to deduct under section 194C?
