194C section in taxation

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Section 194C of the Income Tax Act deals with tax deduction at source (TDS) on payments made to contractors and sub-contractors.

Section 194C applies to both individuals and businesses who make payments to contractors or sub-contractors for carrying out any work.
The payer is required to deduct TDS at a specified rate (currently 1% for individuals and 2% for businesses) if the payment exceeds a certain threshold.
The threshold limit for TDS deduction under section 194C is Rs. 30,000 for a single payment or Rs. 1,00,000 in aggregate during a financial year.
The TDS deducted under section 194C needs to be deposited with the government and a TDS certificate (Form 16A) needs to be issued to the payee.
Failure to deduct TDS or non-compliance with the provisions of section 194C may attract penalties and interest.
Example: If a company pays a contractor Rs. 50,000 for construction work, they need to deduct TDS at 2% (Rs. 1,000) and deposit it with the government.

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