TDS Sections Explained: 192, 194A, 194C, 194H, 194J — When Each Applies

TDS (Tax Deducted at Source) is income tax withheld at the point of payment by the payer, not collected later from the recipient. The Income Tax Act has 30+ TDS sections covering everything from salaries to e-commerce to virtual digital assets. Most businesses hit five of them constantly. This guide is about those five.

Section 192: Salary

TDS on salary, deducted by employer monthly. Rate is the employee's average rate of tax based on their projected annual income — not a flat percentage.

• Threshold: applies if annual income exceeds the basic exemption limit (₹2.5L old regime, ₹3L new regime).
• Rate: employer projects total annual income, applies relevant slab rates (with surcharge / cess), divides by 12 → that's the monthly TDS.
• Form: Quarterly return Form 24Q. Annual Form 16 issued to employee by 15 June.

Use our Income Tax Calculatorto verify your employer's monthly TDS computation.

Section 194A: Interest

TDS on interest paid (other than interest on securities). Banks deduct this on FD interest. Companies deduct this on inter-company loans, post-dated cheques carrying interest, etc.

• Threshold: ₹40,000 per year for non-senior citizens, ₹50,000 for senior citizens. Lower limit (₹5,000) for cooperative societies and others.
• Rate: 10%.
• Form 15G/15H: if your total income is below taxable limit, submit Form 15G (under 60) or 15H (senior citizen) to the bank to avoid TDS deduction. Form 15H is the most-used form in Indian banking.

Section 194C: Contractor / Sub-contractor

TDS on payments to contractors for work — manufacturing, construction, supply of labour, broadcasting, advertising, etc. The single most-applied section in business operations.

• Threshold: ₹30,000 per single transaction OR ₹1,00,000 aggregate per financial year (whichever is reached first).
• Rate: 1% if contractor is an individual / HUF, 2% if any other (firm, company, AOP, BOI).
• Common use: housekeeping vendors, AMCs, courier services, logistics, advertising agencies, freelance designers, video producers, event management, catering.
• Note: TDS is on the full payment, not just the labour component. If a contractor invoices ₹50,000 inclusive of materials and labour, TDS is on ₹50,000.

Section 194H: Commission / Brokerage

TDS on commission or brokerage paid (other than insurance commission, which is 194D). Used for sales commissions, broker fees, distribution commissions.

• Threshold: ₹15,000 per year per recipient.
• Rate: 2% (changed from 5% to 2% by Finance Act 2024 for FY 2024-25 onwards).
• Common use: sales agent commissions, real estate broker fees, stock broker fees (some), franchise commissions.

Section 194J: Professional / Technical Fees

TDS on professional fees, technical services, royalty, non-compete fees. The catch-all for service-business payments.

• Threshold: ₹30,000 per year per recipient.
• Rate: 10% for professional fees (CA, lawyer, doctor, consultant, software developer with specialised expertise). 2% for “technical services” rendered as part of a call centre or BPO operation.
• Common confusion vs 194C: if the work is principally knowledge-based (advice, design, code, analysis) — use 194J. If the work is principally execution-based (manufacturing, transportation, manual work) — use 194C. Grey areas (e.g. specialised manufacturing): consult your CA.

Comparison table at a glance

For the full chart including all 30+ sections (194B lottery, 194I rent, 194IA property, 194Q goods purchase, 194S crypto, 195 non-residents, etc.), see our TDS Rate Chart 2025-26.

Section 206AA: the missing-PAN penalty

If the recipient (deductee) hasn't furnished PAN to the deductor, TDS is deducted at the higher of:

• (a) rate prescribed under the relevant section (e.g. 10% under 194J)
• (b) rate in force
• (c) 20%

Always furnish PAN to your payer. Missing PAN turns 1% TDS into 20%. This costs you cashflow (recovered eventually via ITR refund, but with 6-12 months delay).

Compliance deadlines

• Deposit TDS: by 7th of next month. (March deductions: by 30 April.)
• Quarterly return: Form 26Q (non-salary residents), 24Q (salaries), 27Q (non-residents) by end of month after each quarter.
• Form 16 / 16A: issued to deductee within 15 days of return due date.
• Late deposit: 1% per month interest. Late return: ₹200/day under Section 234E. Failure to deduct: 1% per month from when it should have been deducted, plus disallowance of related expense in IT return.

Common mistakes

• Treating ₹30k threshold as monthly. Most TDS thresholds (194C, 194J) are per recipient per financial year, not per transaction or per month. Once you cross ₹30k aggregate to one vendor in a year, deduct on every subsequent payment.
• Forgetting to reverse TDS on cancelled bills. If you deducted TDS but the invoice gets cancelled, you need to amend the TDS return for that quarter.
• Wrong section. A graphic designer is 194J (professional fee), not 194C (contractor). A housekeeping vendor is 194C, not 194J. Get this wrong and your audit can re-classify retroactively.
• Assuming GST + TDS are independent. They aren't fully — TDS under 194Q (purchase of goods) interacts with TCS under 206C(1H) for the same transaction. Check both before invoicing high-value purchases.

The full searchable chart with thresholds and applicability is at TDS Rate Chart 2025-26.