TDS on contractors: section 194C until March, section 393(1) sl. 6(i) from April 2026

What 194C actually covers

Section 194C is tax on a payment to a resident contractor for carrying out any work, including supply of labour. A sub-contractor sits in the same provision. It is not the section for professional fees, and it is not the section an unaudited individual uses for a one-off contractor.

The official FAQ's own example is a monthly housekeeping contract. That is the right mental picture: a specified payer, a resident contractor, a recurring invoice. Advertising, catering, loading, and a works contract for a building are the same family. A CA's invoice is not.

The earlier of credit or payment decides the Act

Contractor TDS is not salary TDS. Salary waits for payment. Contractor tax is triggered on the earlier of credit or payment. Question 1 of the official FAQ is written on that rule, and the professional-fees example there is the same trigger you use for 194C.

Work done in March and credited on 31 March is a 194C deduction, even if you pay in April. An advance paid on 28 March is also 194C, even if you book the invoice in April. The FAQ says you do not need to amend the contract because the new Act starts. You only change the section code on the line.

Deposit March tax by 30 April. Paying it in May because the 2025 Act has started is not a defence. Interest is 1.5 per cent a month from the date of deduction. See TDS payment due dates and the Form 26Q map.

The thresholds and rates that stayed

The official FAQ, question 3, says TDS rates and monetary thresholds were retained. Section 393 is a table, not a rate change.

The department's own threshold note for 194C is the pair you already use: no deduction if a single payment does not exceed ₹30,000, and no deduction if the aggregate in the financial year does not exceed ₹1,00,000. Cross either line and the whole sum is in. The FAQ says that pair continues under sl. no. 6(i).

The rate still depends on who the contractor is. An individual or HUF contractor is deducted at 1 per cent. Any other resident contractor is deducted at 2 per cent. Do not invent a third rate because the section number changed.

If you do not deduct, or you deduct and do not deposit by the return due date, section 35(b)of the 2025 Act disallows 30 per cent of the sum while computing business income. The FAQ's own numbers: ₹5 lakh of professional fees unpaid as TDS becomes a ₹1.5 lakh disallowance. The same arithmetic applies to a contractor line.

194M is a different form

An individual or HUF who is not required to get accounts audited does not use 194C. That payer, above the 194M threshold, uses section 194M until 31 March 2026 and section 393(1) table sl. no. 6(ii) from 1 April 2026. The vehicle is Form 26QD, then Form 141. It is not Form 26Q.

Putting a 194M payment on 26Q, or a 194C payment on 26QD, is how a correction statement starts. The official FAQ, question 9, keeps those four challan-cum-statements in their own box for a reason.

How to confirm on official pages

1. Read questions 1 to 5 and question 9 on the official TDS Compliance FAQ. Question 2 is the housekeeping-contract cutover.
2. Open section 393 and find table sl. no. 6(i) for payments from April 2026.
3. File the 26Q or Form 141 only through e-Filing / TRACES.

Match the contractor's credit against 26AS and AIS for AY 2026-27, and against Form 168 for tax year 2026-27.

Where Complied AI fits

The sl. no. 6(i) mapping is in the department's own FAQ. What still moves is the return utility or a correction to the TDS table. CBDT updates on Complied AI keep those next to section 393 so accounts is not quoting 194C on an October 2026 26Q.