TDS on Contractor (Section 194C)
Section 194C of the Income Tax Act requires housing societies to deduct Tax Deducted at Source (TDS) when making payments to contractors or sub-contractors above the prescribed threshold.
What is TDS on Contractor (Section 194C)?
When a housing society pays a contractor — for lift maintenance, security services, pest control, civil works, cleaning — and the payment exceeds ₹30,000 per transaction or ₹1,00,000 per year, TDS must be deducted at 1% (for individuals/HUF) or 2% (for companies/firms).
The deducted TDS must be deposited with the government by the 7th of the following month and reported in quarterly TDS returns (Form 26Q).
Why it matters
Non-deduction of TDS makes the society liable for the tax, plus interest at 1.5% per month, plus a penalty equal to the TDS amount. The total cost of non-compliance can be 3–4x the original TDS.
Contractors whose TDS is not deducted face issues when filing their income tax returns — their income is not reflected in Form 26AS, causing mismatches.
Legal & regulatory context
Section 194C, Income Tax Act 1961. The TAN (Tax Deduction Account Number) must be obtained by the society before deducting TDS. Filing Form 24G after deposit and Form 26Q quarterly are mandatory compliance steps.
A housing society is an 'assessee' under the Income Tax Act and therefore subject to TDS provisions once its annual income exceeds the basic exemption threshold.
How SocietyBee handles it
SocietyBee tracks vendor payments and flags transactions that cross Section 194C thresholds. The system can generate a TDS payment summary for the treasurer or CA to use when depositing TDS and filing returns.
Try SocietyBee free →Frequently asked questions
Does TDS apply to all contractors or only specific types?
Section 194C applies to 'work contracts' — including labour contracts, advertising, broadcasting, catering, and carriage. Pure purchase of goods does not attract TDS 194C.
What if the contractor has a lower TDS certificate?
If the contractor holds a valid certificate under Section 197 for lower or nil TDS, deduct at the rate specified in the certificate, not the standard rate.
Does a housing society need a TAN?
Yes, if it deducts TDS. A society that pays contractors above thresholds must apply for TAN from the Income Tax department before making the deduction.