TDS Sections Every Startup Hits: 194C, 194J, 194Q and 194I
Paying contractors, consultants, rent or large suppliers? You probably have to deduct TDS. Here's a plain-English guide to the TDS sections a startup hits most — 194C, 194J, 194Q and 194I — with rates and thresholds.
If your startup pays contractors, consultants, rent, or buys goods in volume, you're likely required to deduct TDS — most commonly under Section 194C (contractors, ~1–2%), 194J (professional/technical fees, ~2–10%), 194I (rent, ~2–10%), and 194Q (large goods purchases, 0.1%). You deduct at payment, deposit by the 7th of the next month, and file a quarterly return. Getting the section and rate right matters — under-deduction disallows the expense and attracts interest. Here's the map.
Why this catches startups
The moment you hire a freelancer, engage an agency, pay office rent, or cross a purchase threshold with a supplier, you become a deductor — you must obtain a TAN, deduct the right TDS, deposit it, and file returns. Founders often pay the full invoice and only later learn they should have withheld tax — which is expensive to fix.
The sections you'll hit most
194C — payments to contractors
TDS on payments to contractors and sub-contractors — typically 1% (individual/HUF payee) or 2% (others), above the per-payment and annual thresholds. Covers most agency, vendor, and works contracts. See 194C.
194J — professional and technical fees
TDS on professional fees, technical services, royalty and director's remuneration — generally 10% (2% for technical services / certain cases), above ₹30,000/year. Covers consultants, lawyers, CAs, designers on contract. See 194J.
194I — rent
TDS on rent — commonly 2% (plant/machinery) or 10% (land/building/furniture), above the annual threshold. Your office lease usually triggers it.
194Q — purchase of goods
If your turnover exceeds ₹10 crore, TDS at 0.1% on purchases of goods from a resident seller beyond ₹50 lakh in a year. See 194Q.
(Salaries are covered separately under 192; payments to non-residents under 195, which also brings in 15CA/15CB.)
The three-step obligation
For every deduction: deduct at the right rate, deposit by the 7th of the following month, and report it in the quarterly return (24Q/26Q/27Q). Missing any step has its own penalty — the three TDS penalties explain how deduction, deposit and return failures each cost you. And non-deduction can disallow 30% of the expense for income tax.
Get the section and rate right, every payment
TDS is a per-payment judgment (which section, which rate, which threshold) plus a monthly deposit and quarterly return. ComplianceStack tracks the TDS deposit and returns as dated tasks with evidence; check any interest on the TDS interest calculator. Get your free compliance health check.
FAQs
- What TDS section applies to contractor payments?
- Section 194C — typically 1% for individual/HUF payees and 2% for others, above the prescribed thresholds.
- What is the TDS rate on professional fees?
- Under Section 194J, generally 10% (2% for technical services and certain cases), above ₹30,000 per year.
- Do I deduct TDS on office rent?
- Yes — Section 194I, commonly 2% for plant/machinery and 10% for land/building/furniture, above the annual threshold.
- What happens if I don't deduct TDS?
- Interest under Section 201, a possible disallowance of 30% of the expense, and penalties — plus the late-deposit and late-return charges if applicable.
This article is general information, not tax, legal or accounting advice. Statutory timelines and thresholds change by notification — confirm applicability and interpretation with your CA, CS, or lawyer before acting.
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