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If you pay a contractor for construction work in India, the governing TDS provision depends first on when the amount was credited or paid and who the payer is. For the relevant event on or after 1 April 2026, check section 393(1) of the Income Tax Act, 2025; for an event on or before 31 March 2026, the Income Tax Act, 1961 applies. The applicable threshold, rate and reporting route still need to be checked against the current table for your circumstances.
Which Act applies to a contractor payment?
Use the earlier of the date the contractor amount is credited and the date it is paid to determine the transition rule. The Income Tax Department says events through 31 March 2026 fall under the Income Tax Act, 1961, while events from 1 April 2026 fall under the Income Tax Act, 2025. Its guidance on the changeover is set out in the Tax Payments FAQ and TDS Compliance FAQs.
| Earlier credit or payment event | Governing law and reporting reference |
|---|---|
| On or before 31 March 2026 | Income Tax Act, 1961; contractor TDS was addressed under section 194C. |
| On or after 1 April 2026 | Income Tax Act, 2025; use the relevant section 393 table item for the payment and payer category. |
For example, if a contractor bill is credited on 31 March 2026 and paid in April, the earlier event is in March, so the old Act applies. A later credit and payment in April are assessed under the new Act. The transition is not determined solely by when cash reaches the contractor.
What section applies under the 2025 Act?
For a company’s contractor payment after the changeover, the Department’s example directs the payer to section 393(1), Table serial number 6(i), rather than section 194C. It describes a company paying a contractor on 5 April 2026 and reporting the transaction for Tax Year 2026–27.
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Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →The payer category matters. The notified Income-tax Rules, 2026 identify a specified individual/HUF contractor or professional payment route under section 393(1), Table 6(ii), through the relevant challan-cum-statement schedule. Do not assume that the company example or its reporting route applies to an individual or HUF. The official Income-tax Rules, 2026, notified 20 March 2026, contain the Form 141 schedule.
When does a construction payment actually require TDS?
A building project alone does not establish that every invoice is subject to contractor TDS. You need to identify the payer, the payee and the legal character of the payment, then test those facts against the relevant Table 6 entry and its conditions. The current official FAQ material confirms that rates and monetary thresholds were retained in the transition, but it does not state the contractor-specific figures. Therefore, no single threshold or rate can safely be applied here across all payer and contractor categories.
- Identify the payer. Determine whether the payer is a company or other designated payer, or an individual/HUF covered by the separate challan-cum-statement route.
- Classify the payment. Check whether the amount is a contractor payment covered by the relevant statutory table entry; a construction-related invoice is not automatically enough.
- Apply the transition date. Use the earlier credit or payment event to choose the 1961 or 2025 Act.
- Verify the current table. Confirm the applicable threshold, rate and any conditions in section 393(1), Table 6, and check for current amendments. Do not carry an old section 194C figure forward without verification.
The Department says the new Act reorganized TDS provisions into tables and retained rates and thresholds, but the FAQ sources cited here do not provide the specific Table 6 amounts. Consult the current statutory table or a tax professional for a decision on your particular payer, payee and payment.
How to handle an ongoing construction contract
The change of Act does not, by itself, require an amendment to an ongoing contract, according to the Department’s FAQ. Apply the transition test to each relevant credit or payment event: a March 2026 event remains under the 1961 Act, while a qualifying April 2026 event is handled under the 2025 Act.
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For post-1 April 2026 transactions, quoting an old section number such as 194C may trigger validation or processing errors; a correction statement may be needed. The Department’s stated reporting example for a company contractor payment after the changeover uses section 393(1), Table 6(i).
Does Form 141 apply to every contractor payment?
No. Form 141 is a unified challan-cum-statement for specified categories that were previously handled through separate forms. The rules’ schedule identifies the specified individual/HUF contractor or professional payment category under Table 6(ii). It does not establish that all company contractor payments use Form 141. Use the form and filing route that match the payer and transaction category in the current rules. The rules prescribe a 30-day period for listed challan-cum-statement categories; that timing should not be treated as a universal deadline for every deductor or payment.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Do old section 194C explanations still matter?
Some earlier official interpretations can continue to matter where they are not inconsistent with the new Act. The Department says this includes the old section 194C explanation of “work” for section 393 where the legislative intent is unchanged. See the Department’s Objective and scope of the New Act FAQs. This continuity does not remove the need to use the new section and table references for post-transition reporting.
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