TDS on Contracts, Professional Fees and Rent
The 194-series sections are the workhorses of TDS practice: 194C (contract payments at 1%/2%), 194J (professional and technical fees at 10%/2%) and 194I (rent at 10% for buildings, 2% for plant and machinery) — with thresholds every CA student must know cold.
The provision, in plain terms
194C: payments to resident contractors — TDS at 1% (payee individual/HUF) or 2% (others) where a single payment exceeds ₹30,000 or annual aggregate exceeds ₹1,00,000. 194J: fees for professional services at 10%, fees for technical services and certain royalties at 2%, threshold ₹30,000 per category per year (director fees: no threshold). 194I: rent exceeding the annual threshold (₹2,40,000, enhanced to ₹50,000/month from FY 2025-26 changes) — 10% for land/building/furniture, 2% for plant, machinery and equipment. Individuals/HUFs deduct only if subject to tax audit in the preceding year (with 194M as fallback above ₹50 lakh).
Points worth memorising
- 194C rates: 1% (individual/HUF payee) / 2% (other payees); thresholds ₹30,000 single / ₹1,00,000 aggregate.
- 194J rates: 10% professional fees; 2% technical services and cinematic royalty; call-centre business 2%.
- 194I rates: 10% building/land/furniture; 2% plant and machinery.
- No PAN → section 206AA forces deduction at the higher of the applicable rate or 20%.
- Transport contractors owning ≤10 goods carriages furnishing a declaration are exempt under 194C(6).
How the exam tests it
TDS rate-and-threshold MCQs are guaranteed marks in CA Intermediate Taxation, and Final Direct Tax tests interplay with disallowance under 40(a)(ia), 201 consequences and returns — memorise the table, then practise scenario application.
Tested at: intermediate · final
Related sections
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Talk to usWhen does an individual have to deduct TDS on rent?
An individual/HUF liable to tax audit deducts under 194I; others paying rent above ₹50,000 per month deduct 2% under section 194-IB from the last month's rent of the year, without needing a TAN.
Is TDS under 194J deducted on GST included in the invoice?
No — where GST is indicated separately in the invoice, TDS is deducted on the amount excluding GST, per CBDT circular.