Use this skill whenever asked about Indian TDS (Tax Deducted at Source) on payments to freelancers, contractors, or professionals. Trigger on phrases like "TDS freelance India", "Section 194J", "Section 194C", "Section 194O", "TDS rate professional services", "Form 26Q", "Form 16A", "TDS certificate", "26AS", "AIS reconciliation", "TDS return India", "lower deduction certificate", "Section 197", "Section 206AA", "PAN not provided TDS", or any question about TDS obligations when paying or receiving freelance/contractor payments in India. Covers Section 194J (professional/technical services), 194C (contractor payments), 194O (e-commerce), TDS return filing (Form 26Q), TDS certificates (Form 16A), Form 26AS/AIS reconciliation, higher rate for missing PAN (Section 206AA), and lower deduction certificates (Section 197). ALWAYS read this skill before touching any India TDS work involving freelancers or contractors.
Accountant-reviewed general reference. Reviewed by Mayur Deokaras reference material, not for your specific facts. Don't file, pay, or take a position on it without a professional reviewing your situation.
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Scope the engagement and screen residency
Establish whether the client is the payer (deductor) or the payee (deductee). Collect PAN of the payee, TAN of the deductor, the payee's legal status (individual/HUF vs company/firm/AOP), single and aggregate amounts for the financial year, and whether a Section 197 lower-deduction certificate exists. Confirm the payee is resident.
Watch for: If the payee is a non-resident, stop. Section 195 governs those payments, not 194C/194J/194O. Escalate to a Chartered Accountant.
Income-tax Act, 1961, ss 194C, 194J, 194O, 195, 197, 206AA; TAN mandatory for deduction
Classify the payment into the right section
Decide the governing section from the nature of the work. Fees for professional or technical services go to 194J; payments to a contractor for carrying out work (including manufacturing to specification, transport, catering, construction) go to 194C; anything facilitated through an e-commerce platform goes to 194O. GST and pure goods purchases are outside TDS.
Watch for: For a platform-facilitated transaction, 194O takes precedence and the hiring client does not additionally deduct under 194J or 194C. Where a contract mixes professional work and execution, flag the dominant-nature question for CA review.
Every figure is drawn from this Tax Guide and cited to its source.
Threshold
Threshold increase to Rs 50,000 from financial Year 2025-26 (ITA 194J)ITA s 194J
Individual/HUF rate
1%ITA s 194C
Company/firm/AOP rate
2%ITA s 194C
Single payment threshold
INR 30,000Income Tax Act, 1961, Section 194C
Aggregate annual threshold
INR 1,00,000ITA s 194C
Rate
Rate is 0.1%.New Section 393 applicable as per Income tax act 2025 from FY 2026-27ITA s 194O
Threshold (individual/HUF)
INR 5,00,000 per annum per participantITA s 194O
Who deducts
E-commerce operator (platform)ITA s 194O
Rate without PAN
5% in case of section 194O and 194Q.(Section 206AA as per ITA 1961 and section 393 as per new ITA 2025)ITA s 206AA
Reviewed against the cited tax authorities by Mayur Deokar on 2026-06-06.
Items flagged for further clarification are tracked separately and excluded here.
This block is generated from verified skill_facts — edit the facts, not the prose.
[T1] Tier 1 -- Deterministic. Apply exactly as written. No reviewer judgement required. [T2] Tier 2 -- Reviewer Judgement Required. Claude flags and presents options. Chartered Accountant must confirm. [T3] Tier 3 -- Out of Scope / Escalate. Do not guess. Escalate and document.
Before computing any TDS figure, you MUST know:
If the payee is a non-resident, STOP. Section 195 applies, not 194C/194J. Escalate to [T3].
Section 194J details (Income Tax Act, 1961, Section 194J)
| Item | Detail |
|---|---|
| Applies to | Fees for professional services OR fees for technical services |
| TDS rate | 10% |
| Reduced rate | 2% for fees for technical services (NOT professional services) paid to a resident |
| Threshold | INR 30,000 per annum per payee |
| When to deduct | At the time of credit to payee's account OR at the time of payment, whichever is earlier |
Included vs Excluded
| Included | Excluded |
|---|---|
| Legal services | Salary payments (covered by Section 192) |
| Medical services | Goods purchases |
| Engineering services | Reimbursement of expenses (if separately billed and identifiable) |
| Architectural services | Payments to government bodies |
| Accountancy services | |
| Technical consultancy | |
| Interior decoration | |
| Advertising (certain) | |
| Sports commentary |
Included
| Included |
|---|
| Managerial services |
| Technical services |
| Consultancy services |
| Any service requiring technical expertise (call centre, data processing, etc.) |
Section 194C details (Income Tax Act, 1961, Section 194C)
| Item | Detail |
|---|---|
| Applies to | Payments to contractors/sub-contractors for carrying out any work (including supply of labour) |
| TDS rate (individual/HUF) | 1% |
| TDS rate (others: company, firm, AOP, etc.) | 2% |
| Single payment threshold | INR 30,000 |
| Aggregate annual threshold | INR 1,00,000 |
| When to deduct | At the time of credit or payment, whichever is earlier |
Included vs Excluded
| Included | Excluded |
|---|---|
| Contract for manufacturing/supply of a product per buyer's specification | Purchase of goods from a seller's stock (not a contract) |
| Catering | Professional services (covered by 194J) |
| Transport/freight | Payments to employees |
| Printing | Personal purchases |
| Construction | |
| Software development (if contract for work, not professional service) | |
| Housekeeping, security services |
Decision matrix
| Nature of Service | Section | Rate |
|---|---|---|
| Freelance software developer writing custom code | 194J (professional/technical) | 10% or 2% |
| IT company providing manpower on contract | 194C | 1% / 2% |
| Architect designing a building | 194J (professional) | 10% |
| Construction contractor building the design | 194C | 1% / 2% |
| Chartered Accountant preparing accounts | 194J (professional) | 10% |
| Data entry operator on contract | 194C | 1% / 2% |
Section 194O details (Income Tax Act, 1961, Section 194O)
| Item | Detail |
|---|---|
| Applies to | E-commerce operators facilitating sale of goods/services by e-commerce participants |
| TDS rate | 1% |
| Threshold | INR 5,00,000 per annum per participant (for individuals/HUFs only) |
| Who deducts | The e-commerce OPERATOR (platform), not the buyer |
| Effective from | 1 October 2020 |
Normal rate vs 206AA rate (Income Tax Act, 1961, Section 206AA)
| Normal Rate | 206AA Rate |
|---|---|
| Any rate under Chapter XVII-B | Higher of: (a) the rate specified in the section, (b) the rate in force, or (c) 20% |
Practical application table
| Section | Normal Rate | Rate Without PAN |
|---|---|---|
| 194J (professional) | 10% | 20% |
| 194J (technical) | 2% | 20% |
| 194C (individual/HUF) | 1% | 20% |
| 194C (others) | 2% | 20% |
| 194O | 1% | 20% (but 5% if 206AB applies) |
Rate table (Income Tax Act, 1961, Section 206AB)
| Rate | Detail |
|---|---|
| Higher of | (a) twice the rate specified in the relevant section, OR (b) 5% |
Deposit due dates (Rule 30 of Income-tax Rules, 1962)
| Deductor Type | Due Date for Deposit |
|---|---|
| Government deductors | Same day of deduction |
| Non-government deductors | 7th of the following month |
| March deductions | 30 April (extended deadline for March TDS) |
Form 26Q is the quarterly TDS return for non-salary payments (including 194C, 194J, 194O).
Quarterly filing due dates (Section 200(3); Rule 31A)
| Quarter | Period | Filing Due Date |
|---|---|---|
| Q1 | 1 April -- 30 June | 31 July |
| Q2 | 1 July -- 30 September | 31 October |
| Q3 | 1 October -- 31 December | 31 January |
| Q4 | 1 January -- 31 March | 31 May |
Filing requirements
| Item | Detail |
|---|---|
| Who must file | Any person who has deducted TDS under Chapter XVII-B |
| How | Online via TRACES (tdscpc.gov.in) using DSC or EVC |
| Software | Return Preparation Utility (RPU) from TRACES, or commercial TDS software |
| Nil return | NOT mandatory but recommended to avoid default notices |
| Corrections | Correction returns (C1/C2/C3/C4/C5) can be filed via TRACES |
Penalty table
| Penalty | Amount |
|---|---|
| Section 234E | INR 200 per day of delay (maximum = total TDS deductible) |
| Section 271H | INR 10,000 to INR 1,00,000 (at AO's discretion for delay > 1 year or incorrect information) |
Form 16A details (Section 203; Rule 31)
| Item | Detail |
|---|---|
| Form | Form 16A (certificate for non-salary TDS) |
| Issued by | Deductor to deductee |
| Frequency | Quarterly (one per quarter of deduction) |
| Due date | Within 15 days from the due date of filing Form 26Q |
| Generation | Download from TRACES after filing Form 26Q (auto-generated with digital signature) |
Due dates by quarter
| Quarter | 26Q Due | 16A Due |
|---|---|---|
| Q1 (Apr-Jun) | 31 July | 15 August |
| Q2 (Jul-Sep) | 31 October | 15 November |
| Q3 (Oct-Dec) | 31 January | 15 February |
| Q4 (Jan-Mar) | 31 May | 15 June |
Forms table (Section 203AA; Rule 31AB)
| Form | Purpose |
|---|---|
| Form 26AS | Annual Tax Statement -- shows all TDS/TCS credited against the taxpayer's PAN |
| AIS (Annual Information Statement) | Extended version showing financial transactions (SFT data, interest, dividends, purchases, etc.) |
| TIS (Taxpayer Information Summary) | Aggregated and categorised summary of AIS data |
WARNING: TDS credit is allowed ONLY if reflected in Form 26AS. If the deductor has deducted TDS but not deposited or filed 26Q, the DEDUCTEE cannot claim credit. The deductee should pursue the deductor.
Certificate details (Income Tax Act, 1961, Section 197)
| Item | Detail |
|---|---|
| Application | Form 13 filed online on the Income Tax portal |
| Issued by | Assessing Officer (AO) |
| Certificate specifies | NIL rate or a reduced rate |
| Validity | Typically for one financial year |
| Deductor obligation | Must apply the rate specified in the certificate (not the statutory rate) |
Recommendation scenarios
| Scenario | Action |
|---|---|
| Freelancer with income below basic exemption limit | Recommend applying for NIL certificate |
| Professional with high expenses and low taxable income | Recommend applying for reduced rate certificate |
| Multiple deductors deducting at full rate causing cash flow issues | Recommend lower deduction certificate |
Situation: Invoice includes INR 2,00,000 for software development (service) and INR 50,000 for hardware (goods purchase). Resolution: If amounts are separately identifiable in the invoice, TDS applies only to the service component (194J on INR 2,00,000). If not separately stated, TDS on the entire amount. [T2] flag for CA.
Situation: Freelancer invoices INR 1,00,000 for consulting + INR 20,000 for travel reimbursement. Resolution: If reimbursement is separately billed and supported by actual receipts, TDS may not apply to the reimbursement component (per CBDT Circular 715/1995 and subsequent judicial decisions). However, this is frequently disputed. [T2] flag for CA.
Situation: Payment under 194C to a partnership firm. Resolution: Partnership firm is NOT an individual/HUF. Rate = 2% (not 1%).
Situation: Four payments of INR 28,000 each to the same contractor. Total = INR 1,12,000. No single payment exceeded INR 30,000. Resolution: Aggregate exceeded INR 1,00,000. TDS should have been deducted from the 4th payment onward (when the aggregate crossed INR 1,00,000). If not deducted on earlier payments, the deductor is treated as an assessee in default. Deduct TDS on subsequent payments and consider depositing shortfall with interest.
Situation: Graphic designer sells services via an e-commerce platform like Fiverr or Urban Company. Resolution: 194O applies (1% TDS by the e-commerce operator). The hiring client does NOT additionally deduct 194J. 194O takes precedence for transactions facilitated through the platform. If the client hires the freelancer directly (off-platform), 194J applies.
Situation: Deductor deducted TDS of INR 50,000 from the freelancer's payment but has not deposited to the government. 26AS shows no credit. Resolution: The DEDUCTEE cannot claim credit until it appears in 26AS. The deductee should: (1) demand Form 16A from the deductor, (2) report to the Income Tax Department if deductor refuses, (3) file ITR without the credit and claim it via rectification once 26AS is updated.
Situation: Client pays a freelancer INR 15,000 for accounting and INR 20,000 for tax advisory in the same FY. Total = INR 35,000. Resolution: Aggregate exceeds INR 30,000. TDS applies to the entire INR 35,000 (not just the excess). The deductor should have started deducting from the payment that pushed the aggregate over INR 30,000.
Situation: Invoice: Base fee INR 1,00,000 + GST 18% = INR 18,000. Total invoice INR 1,18,000. Resolution: Per CBDT Circular 23/2017, TDS is to be deducted on the base amount EXCLUDING GST, provided GST is separately shown in the invoice. TDS = 10% of INR 1,00,000 = INR 10,000 (not INR 11,800).
Situation: Freelancer files under Section 44ADA (presumptive). Has TDS of INR 80,000 deducted. Presumptive tax liability = INR 50,000. Resolution: TDS credit (INR 80,000) exceeds tax liability (INR 50,000). Excess INR 30,000 is refundable via ITR filing. The freelancer MUST file ITR to claim the refund.
Situation: Company provides a freelancer with a laptop worth INR 50,000 as part of the engagement. Resolution: Section 194R (introduced in 2022) requires TDS at 10% on benefits/perquisites exceeding INR 20,000 provided to resident contractors/professionals. TDS = 10% x INR 50,000 = INR 5,000. The deductor may provide cash to cover the TDS. [T2] flag for CA.
When Claude identifies a [T2] situation:
REVIEWER FLAG
Tier: T2
Client: [name]
Situation: [description]
Issue: [what is ambiguous]
Options: [possible treatments]
Recommended: [most likely correct treatment and why]
Action Required: Chartered Accountant must confirm before advising client.
When Claude identifies a [T3] situation:
ESCALATION REQUIRED
Tier: T3
Client: [name]
Situation: [description]
Issue: [outside skill scope]
Action Required: Do not advise. Refer to Chartered Accountant. Document gap.
Input: Payment of INR 1,50,000 to a freelance chartered accountant for audit services. PAN provided. Expected output: Section 194J applies. TDS = 10% x INR 1,50,000 = INR 15,000. Deposit by 7th of the following month.
Input: Single payment of INR 45,000 to an individual contractor for office renovation. PAN provided. Expected output: Section 194C. Single payment exceeds INR 30,000 threshold. TDS = 1% x INR 45,000 = INR 450.
Input: Two payments of INR 12,000 each to a freelance designer in the same FY. Total = INR 24,000. PAN provided. Expected output: Aggregate INR 24,000 < INR 30,000 threshold. No TDS required.
Input: Payment of INR 60,000 for professional services. Payee has NOT provided PAN. Expected output: Section 206AA applies. TDS = 20% x INR 60,000 = INR 12,000 (instead of normal 10% = INR 6,000).
Input: Invoice: Professional fees INR 2,00,000 + GST 18% = INR 36,000. Total = INR 2,36,000. GST shown separately. PAN provided. Expected output: TDS on base amount only. TDS = 10% x INR 2,00,000 = INR 20,000.
Input: Q1: INR 25,000. Q2: INR 25,000. Q3: INR 25,000. Q4: INR 30,000. All to same individual contractor. PAN provided. Expected output: No single payment > INR 30,000. But aggregate = INR 1,05,000 > INR 1,00,000. TDS obligation arose when aggregate crossed INR 1,00,000 (during Q4 payment). TDS = 1% on the Q4 payment = INR 300. Future payments also subject to TDS.
Input: TDS deducted in July, August, September (Q2). Expected output: Form 26Q for Q2 due by 31 October. Form 16A due by 15 November.
This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a CPA, EA, tax attorney, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.
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Review status
Accountant-reviewed
Reviewed by a named licensed practitioner against the stated sources, as general reference material.
Accountant-reviewed
Reviewed by Mayur Deokar · 6 June 2026
A named accountant reviewed this complete Guide version within the stated scope. It is not a guarantee.
View review record →Other India computations in the OpenAccountants Tax Library.
Income-tax Act, 1961, ss 194J, 194C, 194O
Run the threshold test for the identified section
Apply the section's single-payment and aggregate-annual thresholds against the payee's payments for the financial year to decide whether TDS is triggered at all. For 194C test both the single-payment and the aggregate limits; for 194J and 194O test the annual limit per payee or participant.
Watch for: Once a threshold is crossed, TDS applies to the FULL amount for that payee, not only the excess. For 194C, if the aggregate is crossed mid-year, deduct from the payment that crosses it and on every payment thereafter.
Income-tax Act, 1961, ss 194J, 194C, 194O
Determine the correct rate and apply overrides
Pick the base rate: 194J professional vs technical, 194C individual/HUF vs others, or 194O. Then apply overrides in order. Exclude GST from the base when GST is shown separately on the invoice. Honour any Section 197 certificate rate in place of the statutory rate. If PAN is missing apply the Section 206AA floor; if the payee is a two-year non-filer apply Section 206AB; where both bite, use the higher rate.
Watch for: 206AA and 206AB set a floor, not the whole rule. When PAN is absent the rate is the higher of the section rate, the rate in force, or 20%. GST is excluded from the TDS base only when separately stated (CBDT Circular 23/2017).
Income-tax Act, 1961, ss 194J, 194C, 194O, 197, 206AA, 206AB; CBDT Circular 23/2017
Deduct and deposit the TDS
Deduct at the time of credit to the payee's account or at the time of payment, whichever is earlier. Deposit the tax to the government using Challan ITNS-281 by the due date: the 7th of the following month for non-government deductors, with March deductions allowed until 30 April.
Watch for: Missing the deposit date exposes the deductor to interest and assessee-in-default treatment. Deduct on the base excluding separately-stated GST.
Rule 30, Income-tax Rules, 1962; Challan ITNS-281
File the quarterly TDS return (Form 26Q)
File Form 26Q, the quarterly non-salary TDS return, online through TRACES using DSC or EVC. Due dates: Q1 by 31 July, Q2 by 31 October, Q3 by 31 January, Q4 by 31 May.
Watch for: Late filing draws a Section 234E fee of INR 200 per day (capped at the TDS deductible) and a possible Section 271H penalty. Correct errors via TRACES correction returns rather than leaving mismatches.
Income-tax Act, 1961, s 200(3); Rule 31A; ss 234E, 271H
Issue Form 16A to the deductee
Generate Form 16A from TRACES after filing Form 26Q and issue it to the payee, one per quarter of deduction, within 15 days of the Form 26Q due date (Q1 by 15 August, Q2 by 15 November, Q3 by 15 February, Q4 by 15 June).
Watch for: Never issue Form 16A before Form 26Q for that quarter has been filed; the certificate is generated by TRACES from the filed return.
Income-tax Act, 1961, s 203; Rule 31
Deductee side: reconcile Form 26AS / AIS and claim credit
For the payee, download Form 26AS and the AIS from the income tax portal and match every TDS credit against invoices raised and payments received. Claim credit in the ITR only for amounts reflected in Form 26AS.
Watch for: TDS credit is allowed only if it appears in Form 26AS. If tax was deducted but not deposited or filed, the deductee cannot claim it and must pursue the deductor to correct Form 26Q.
Income-tax Act, 1961, s 203AA; Rule 31AB
Deliver the working paper and offer a review
Assemble the section classification, threshold determination, rate build-up, deduction and deposit dates, and the return and certificate schedule into a single working paper. Present it as a draft and call share_with_openaccountants to save it to the user's OpenAccountants review queue with the booking link and reference.
Watch for: This is a working paper, not a filed return. Nothing is filed until the user engages a professional.
What Mayur checks before signing off
Ready to work through your own numbers? Add this Guide to your AI and it takes it from here, then routes the finished paper for an accountant to review.
Add to your AIProfessional services rate
10%ITA s 194J; New Income Tax Act 2025 s 393 serial No 6(iii)(a)
Technical services rate
2%ITA s 194J; New Income Tax Act 2025 s 393 serial No 6(iii)(b)
Threshold (s 194J)
INR 50,000 per annum per payeeITA s 194J
Individual/HUF rate
1%ITA s 194C
Company/firm/AOP rate
2%ITA s 194C
Single payment threshold
INR 30,000Income Tax Act, 1961, Section 194C
Aggregate annual threshold
INR 1,00,000ITA s 194C
Rate (s 194O — E-commerce)
0.1%ITA s 194O; New Income Tax Act 2025 s 393
Threshold — individual/HUF (s 194O)
INR 5,00,000 per annum per participantITA s 194O
Who deducts (s 194O)
E-commerce operator (platform)ITA s 194O
Rate without PAN (s 206AA)
5% in case of s 194O and s 194Q; otherwise higher of section rate, rate in force, or 20%ITA s 206AA (ITA 1961); New Income Tax Act 2025 s 393
194J professional without PAN
20% (vs normal 10%)ITA s 206AA
194C individual without PAN
20% (vs normal 1%)ITA s 206AA
Jurisdiction
India
Jurisdiction Code
IN
Primary Legislation
Income Tax Act, 1961 -- Sections 194C, 194J, 194O, 197, 206AA
Supporting Legislation
Finance Act 2025; Income-tax Rules, 1962; CBDT Circulars and Notifications
Tax Authority
Central Board of Direct Taxes (CBDT) / Income Tax Department
Filing Portal
https://www.incometax.gov.in (TRACES for TDS: https://www.tdscpc.gov.in)
Contributor
Open Accountants Community
Validated By
Pending -- requires sign-off by a Chartered Accountant (India)
Validation Date
Verified by Mayur Deokar (615638) on 2026-06-06
Skill Version
1.0
Tax Year
FY 2025-26 (AY 2026-27)
Confidence Coverage
Tier 1: TDS rates per section, threshold amounts, Form 26Q due dates, Form 16A timelines, 206AA rates, PAN requirements. Tier 2: classification of payment as 194J vs 194C, mixed contracts, lower deduction certificate process. Tier 3: NRI payments (Section 195), transfer pricing, international services, DTAA treaty benefits.
Legislation
Income Tax Act, 1961, Section 194J
Section 194J details
| Item | Detail | |------|--------| | Applies to | Fees for professional services OR fees for technical services | | TDS rate | 10% | | Reduced rate | 2% for fees for technical services (NOT professional services) paid to a resident | | Threshold | INR 30,000 per annum per payee | | When to deduct | At the time of credit to payee's account OR at the time of payment, whichever is earlier |Income Tax Act, 1961, Section 194J
Included vs Excluded
| Included | Excluded | |----------|----------| | Legal services | Salary payments (covered by Section 192) | | Medical services | Goods purchases | | Engineering services | Reimbursement of expenses (if separately billed and identifiable) | | Architectural services | Payments to government bodies | | Accountancy services | | | Technical consultancy | | | Interior decoration | | | Advertising (certain) | | | Sports commentary | |
Included
| Included | |----------| | Managerial services | | Technical services | | Consultancy services | | Any service requiring technical expertise (call centre, data processing, etc.) |
Key distinction
Professional services (listed in Explanation to 194J) = 10%. Technical/managerial services (not in that list) = 2%. [T2] flag for CA if the classification is ambiguous.
194J threshold rule
if aggregate_payment_to_payee_in_FY <= INR 30,000: no TDS if aggregate_payment_to_payee_in_FY > INR 30,000: TDS on entire amount (not just excess)
WARNING
Once the INR 30,000 threshold is crossed, TDS applies to the FULL amount (including the first INR 30,000), not just the excess.
Legislation
Income Tax Act, 1961, Section 194C
Section 194C details
| Item | Detail | |------|--------| | Applies to | Payments to contractors/sub-contractors for carrying out any work (including supply of labour) | | TDS rate (individual/HUF) | 1% | | TDS rate (others: company, firm, AOP, etc.) | 2% | | Single payment threshold | INR 30,000 | | Aggregate annual threshold | INR 1,00,000 | | When to deduct | At the time of credit or payment, whichever is earlier |Income Tax Act, 1961, Section 194C
Included vs Excluded
| Included | Excluded | |----------|----------| | Contract for manufacturing/supply of a product per buyer's specification | Purchase of goods from a seller's stock (not a contract) | | Catering | Professional services (covered by 194J) | | Transport/freight | Payments to employees | | Printing | Personal purchases | | Construction | | | Software development (if contract for work, not professional service) | | | Housekeeping, security services | |
194C threshold rules
if single_payment <= INR 30,000 AND aggregate_in_FY <= INR 1,00,000: no TDS if single_payment > INR 30,000: TDS on that payment if aggregate_in_FY > INR 1,00,000: TDS on all payments from the date threshold is crossed
Decision matrix
| Nature of Service | Section | Rate | |-------------------|---------|------| | Freelance software developer writing custom code | 194J (professional/technical) | 10% or 2% | | IT company providing manpower on contract | 194C | 1% / 2% | | Architect designing a building | 194J (professional) | 10% | | Construction contractor building the design | 194C | 1% / 2% | | Chartered Accountant preparing accounts | 194J (professional) | 10% | | Data entry operator on contract | 194C | 1% / 2% |
Mixed contract flag
**[T2] If the contract involves both professional services and execution work (e.g., architect who also supervises construction), flag for CA to determine dominant nature of the contract.**
Legislation
Income Tax Act, 1961, Section 194O
Section 194O details
| Item | Detail | |------|--------| | Applies to | E-commerce operators facilitating sale of goods/services by e-commerce participants | | TDS rate | 1% | | Threshold | INR 5,00,000 per annum per participant (for individuals/HUFs only) | | Who deducts | The e-commerce OPERATOR (platform), not the buyer | | Effective from | 1 October 2020 |Income Tax Act, 1961, Section 194O
Legislation
Income Tax Act, 1961, Section 206AA
Normal rate vs 206AA rate
| Normal Rate | 206AA Rate | |-------------|-----------| | Any rate under Chapter XVII-B | Higher of: (a) the rate specified in the section, (b) the rate in force, or (c) **20%** |Income Tax Act, 1961, Section 206AA
Practical application table
| Section | Normal Rate | Rate Without PAN | |---------|-------------|-----------------| | 194J (professional) | 10% | 20% | | 194J (technical) | 2% | 20% | | 194C (individual/HUF) | 1% | 20% | | 194C (others) | 2% | 20% | | 194O | 1% | 20% (but 5% if 206AB applies) |
WARNING
20% is the MINIMUM rate when PAN is not provided. Always verify PAN before making any payment.
Legislation
Income Tax Act, 1961, Section 206AB
Condition
If the payee has NOT filed income tax returns for the two preceding years AND the aggregate TDS/TCS in each of those years exceeded INR 50,000, the higher rate under 206AB applies.
Rate table
| Rate | Detail | |------|--------| | Higher of | (a) twice the rate specified in the relevant section, OR (b) 5% |Income Tax Act, 1961, Section 206AB
Legislation
Rule 30 of Income-tax Rules, 1962
Deposit due dates
| Deductor Type | Due Date for Deposit | |---------------|---------------------| | Government deductors | Same day of deduction | | Non-government deductors | 7th of the following month | | March deductions | 30 April (extended deadline for March TDS) |Rule 30 of Income-tax Rules, 1962
Legislation
Section 200(3); Rule 31A
Quarterly filing due dates
| Quarter | Period | Filing Due Date | |---------|--------|----------------| | Q1 | 1 April -- 30 June | 31 July | | Q2 | 1 July -- 30 September | 31 October | | Q3 | 1 October -- 31 December | 31 January | | Q4 | 1 January -- 31 March | 31 May |Section 200(3); Rule 31A
Filing requirements
| Item | Detail | |------|--------| | Who must file | Any person who has deducted TDS under Chapter XVII-B | | How | Online via TRACES (tdscpc.gov.in) using DSC or EVC | | Software | Return Preparation Utility (RPU) from TRACES, or commercial TDS software | | Nil return | NOT mandatory but recommended to avoid default notices | | Corrections | Correction returns (C1/C2/C3/C4/C5) can be filed via TRACES |
Penalty table
| Penalty | Amount | |---------|--------| | Section 234E | INR 200 per day of delay (maximum = total TDS deductible) | | Section 271H | INR 10,000 to INR 1,00,000 (at AO's discretion for delay > 1 year or incorrect information) |
Legislation
Section 203; Rule 31
Form 16A details
| Item | Detail | |------|--------| | Form | Form 16A (certificate for non-salary TDS) | | Issued by | Deductor to deductee | | Frequency | Quarterly (one per quarter of deduction) | | Due date | Within 15 days from the due date of filing Form 26Q | | Generation | Download from TRACES after filing Form 26Q (auto-generated with digital signature) |Section 203; Rule 31
Due dates by quarter
| Quarter | 26Q Due | 16A Due | |---------|---------|---------| | Q1 (Apr-Jun) | 31 July | 15 August | | Q2 (Jul-Sep) | 31 October | 15 November | | Q3 (Oct-Dec) | 31 January | 15 February | | Q4 (Jan-Mar) | 31 May | 15 June |
Legislation
Section 203AA; Rule 31AB
Forms table
| Form | Purpose | |------|---------| | Form 26AS | Annual Tax Statement -- shows all TDS/TCS credited against the taxpayer's PAN | | AIS (Annual Information Statement) | Extended version showing financial transactions (SFT data, interest, dividends, purchases, etc.) | | TIS (Taxpayer Information Summary) | Aggregated and categorised summary of AIS data |Section 203AA; Rule 31AB
Legislation
Income Tax Act, 1961, Section 197
Condition
If the payee's total income is below the taxable threshold or the effective tax rate is lower than TDS rates, a lower deduction certificate may be sought.
Certificate details
| Item | Detail | |------|--------| | Application | Form 13 filed online on the Income Tax portal | | Issued by | Assessing Officer (AO) | | Certificate specifies | NIL rate or a reduced rate | | Validity | Typically for one financial year | | Deductor obligation | Must apply the rate specified in the certificate (not the statutory rate) |Income Tax Act, 1961, Section 197
Recommendation scenarios
| Scenario | Action | |----------|--------| | Freelancer with income below basic exemption limit | Recommend applying for NIL certificate | | Professional with high expenses and low taxable income | Recommend applying for reduced rate certificate | | Multiple deductors deducting at full rate causing cash flow issues | Recommend lower deduction certificate |
CA flag
**[T2] Always flag for CA before advising on Section 197. The application requires projected income computation and supporting documentation.**
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