TDS on Contractor Payments from 1 April 2026: Section 393 Guide
Contractor TDS moves from old Section 194C to the Section 393 table structure from 1 April 2026. Understand thresholds, 1%/2% rates and practical accounting checks.
From 1 April 2026, contractor payments governed by the new Income-tax Act are reported under the relevant entry of Section 393 instead of quoting old Section 194C.
Common threshold test
The familiar contractor threshold structure continues:
- no deduction where a single payment does not exceed ₹30,000 and the aggregate for the year does not exceed ₹1,00,000; and
- once the applicable threshold is crossed, TDS should be applied in accordance with the law.
What is the rate?
The common rates continue to depend on the status of the contractor:
- 1% where the contractor is an Individual or HUF; and
- 2% for other contractor categories.
What counts as a works contract?
The accountant should review the actual agreement and nature of activity. Labour contracts, job work, advertising, transport arrangements and contracts involving supply of material can require different analysis depending on the facts.
Old Act vs new Act
If the earlier of credit or payment is on or before 31 March 2026, the old Act applies. If it occurs from 1 April 2026 onwards, Section 393 of the new Act applies.
Do not change the law merely because the payment date is in April when the expense was already credited in March.
Practical month-end checks
- Run vendor-wise cumulative totals.
- Check PAN/entity status for the applicable rate.
- Identify contractor expenses hidden in repair, fabrication or service ledgers.
- Review provisions and unbilled expenses.
- Use the correct TDS table code in the new return utility.
For contractor TDS, the ledger name is not enough. Read the contract, identify the payee and monitor the cumulative threshold.