Contractor or professional: 194C or 194J?
1 min read
Updated 03 Oct 2026
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AI summary
The most common TDS confusion in small businesses, solved with examples.
4 sections
The quick test
| Question | If yes |
|---|---|
| Is the payee doing work with labour or material: printing, repairs, catering, transport, manpower, job work, advertising? | Contract, 1% or 2% (old 194C) |
| Is the payee using a professional skill: CA, lawyer, doctor, architect, engineer, consultant, designer? | Professional fees, 10% (old 194J) |
| Is it a technical service without a professional's personal skill, like software maintenance or call centre? | Technical fees, 2% (old 194J) |
Examples
| Payment | Section | Rate |
|---|---|---|
| ₹80,000 to a printer for brochures | Contract | 1% if individual, 2% if company |
| ₹60,000 to your CA for audit | Professional | 10% |
| ₹1,20,000 to a security agency for guards | Contract (manpower supply) | 2% if company/firm |
| ₹70,000 to a transporter who owns 10 or fewer goods carriages and gives PAN with a declaration | Contract | Nil |
| ₹75,000 annual maintenance for accounting software | Technical services | 2% |
Limits
- Contract: deduct if a single bill is above ₹30,000, or the year's total from that party is above ₹1,00,000. Once the yearly total crosses ₹1,00,000, deduct on the whole amount, including earlier bills.
- Professional / technical: deduct once the year's total to that party is above ₹50,000.
In Hisab Central
Create separate ledgers under Duties & Taxes (Alt+L), such as TDS Payable – Contract and TDS Payable – Professional. Then on each bill, credit the right one so the TDS return totals come out correctly.
Law as of September 2026. Verify against the latest notifications before relying on it for filings.
Sources
PreviousTDS rate chart for tax year 2026-27 Next in TDS & TCS TDS on rent, commission and purchase of goods
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