TDS on Contractors 2026-27: Section 393 vs 194C, Rates, Thresholds & Transporters
Updated September 2026: Resident contractor TDS for TY 2026-27 is governed by Section 393(1), Table 6(i) of the Income-tax Act, 2025; old Section 194C remains the familiar legacy reference. The standard rates remain 1% for a resident individual/HUF contractor and 2% for other resident contractors, subject to the current statutory conditions.
Rates and thresholds
| Contractor | Rate | Single-payment threshold | Aggregate threshold |
|---|---|---|---|
| Resident individual/HUF | 1% | ₹30,000 | ₹1,00,000 |
| Other resident contractor | 2% | ₹30,000 | ₹1,00,000 |
What counts as work?
Classification should follow the contract's substance. Work/supply-of-labour and current manpower rules should be distinguished from genuine professional or technical services that can fall under another Section 393 row.
Transporter exception
Do not grant nil deduction merely because the invoice says “transporter.” Check the current statutory conditions, including the qualifying goods-carriage ownership condition, PAN/declaration and prescribed reporting requirements.
Credit/payment timing
For the normal resident-payment framework, deduction generally follows credit or payment, whichever occurs earlier, subject to the applicable provision. Year-end provisions therefore require review where the payee and liability are identified.
Job work and material
Where the statutory work definition and material rule apply, separately stated customer-supplied/purchased material can affect the TDS base. Review the invoice and current statutory note rather than applying TDS mechanically to every gross invoice.
Finance checklist
- Confirm payee residential status.
- Read the contract and classify the service.
- Identify contractor constitution.
- Track single and aggregate thresholds.
- Check transporter relief only with complete evidence.
- Validate PAN and any lower/nil certificate.
- Deduct at the correct trigger.
- Reconcile ledger, challan and quarterly statement.
Frequently asked questions
What is the current contractor TDS provision?
Section 393(1), Table 6(i) under the Income-tax Act, 2025; old Section 194C is the legacy reference.
What are the standard rates?
1% for a resident individual/HUF contractor and 2% for other resident contractors, subject to the law.
What are the main thresholds?
₹30,000 for a single sum and ₹1,00,000 aggregate under the main contractor row.
Can a transporter simply write “no TDS” on an invoice?
No. The payer must verify the statutory transporter conditions and required evidence/reporting.
Is old Section 206AB non-filer logic still required?
No. Section 206AB was omitted from 1 April 2025; PAN-related rules remain a separate check.
Official reference
Income Tax Department — Section 393
Last reviewed: September 2026.
More Frequently Asked Questions
What should I know about Rates and thresholds?
Contractor Rate Single-payment threshold Aggregate threshold Resident individual/HUF 1% ₹30,000 ₹1,00,000 Other resident contractor 2% ₹30,000 ₹1,00,000
What counts as work?
Classification should follow the contract's substance. Work/supply-of-labour and current manpower rules should be distinguished from genuine professional or technical services that can fall under another Section 393 row.
What should I know about Transporter exception?
Do not grant nil deduction merely because the invoice says “transporter.” Check the current statutory conditions, including the qualifying goods-carriage ownership condition, PAN/declaration and prescribed reporting requirements.
What should I know about Credit/payment timing?
For the normal resident-payment framework, deduction generally follows credit or payment, whichever occurs earlier, subject to the applicable provision. Year-end provisions therefore require review where the payee and liability are identified.
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