INCOME-TAX ACT 2025 · FROM 1 APRIL 2026
Section 194C (payments to contractors): new TDS payment code 1023 and 1024
From 1 April 2026, section 194C of the Income-tax Act 1961 (payments to contractors) is reported under the Income-tax Act 2025 as payment code 1023 (contractor: individual or HUF payee) and 1024 (contractor: other payee), under section 393(1) Sl. 6(i).D(a) and 393(1) Sl. 6(i).D(b).
| OLD SECTION | NEW CODE | NEW SECTION REFERENCE | NATURE OF PAYMENT | GENERAL RATE | NO TDS BELOW |
|---|---|---|---|---|---|
| 194C | 1023 | 393(1) Sl. 6(i).D(a) | Contractor: individual or HUF payee | 1% | Up to ₹30,000 in a single payment and up to ₹1,00,000 in the year in total |
| 194C | 1024 | 393(1) Sl. 6(i).D(b) | Contractor: other payee | 2% | Up to ₹30,000 in a single payment and up to ₹1,00,000 in the year in total |
What changed
The Income-tax Act 2025 replaces the separate 194-series sections with one table. Salary sits in section 392, almost every other deduction in section 393, and collection at source in section 394. Each row of the table has a four-digit payment code, and that code replaces the section number on challans and in quarterly statements. The period is now called the Tax Year, which is the same twelve months as the financial year.
Worked example
- 1023: One payment of ₹60,000 (Contractor: individual or HUF payee) is above the ₹30,000 limit. Tax at 1% on it is ₹600.
- 1024: One payment of ₹60,000 (Contractor: other payee) is above the ₹30,000 limit. Tax at 2% on it is ₹1,200.
Common questions
- What is the new code for section 194C?
- From 1 April 2026, section 194C of the Income-tax Act 1961 (payments to contractors) is reported under the Income-tax Act 2025 as payment code 1023 (contractor: individual or HUF payee) and 1024 (contractor: other payee), under section 393(1) Sl. 6(i).D(a) and 393(1) Sl. 6(i).D(b).
- Which code do I put on the TDS challan for section 194C?
- For tax deducted on or after 1 April 2026 use challan ITNS 281N and enter payment code 1023 and 1024, whichever matches the payment in the section-wise payment table. For deductions up to 31 March 2026, the old challan ITNS 281 with the 1961 Act section still applies.
- Why does section 194C have more than one new code?
- The Income-tax Act 2025 lists each kind of payment as its own row in the table under section 393(1). 1023 is for contractor: individual or HUF payee; 1024 is for contractor: other payee.
- What is the threshold for section 194C?
- Up to ₹30,000 in a single payment and up to ₹1,00,000 in the year in total.
- Has the rate of TDS changed?
- The new Act reorganises and renumbers the provisions. This page lists the general rate, and the threshold where one is shown, only where the published tables agree. Check both for your payment on the e-filing portal or in the Act itself.
Have challans to enter?
Drop the challan PDFs, old ITNS 281 or new 281N, and get one Excel sheet with the code, BSR, date and breakup.
OTHER SECTIONS
Compiled from two published code tables (TDSMAN rate chart and Terra Insight payment-code reference, both read on 18 September 2026) and confirmed against real ITNS 281N challan receipts for code 1031. Only rows on which both tables agree are listed. TCS codes, the salary codes under section 392 and code 1038 are left out because the tables disagree. Confirm on the income-tax e-filing portal before filing. Thresholds read on 8 October 2026 from the Finance Bill 2025 memorandum on indiabudget.gov.in (official; it sets the 194A, 194H, 194I and 194J figures under the 1961 Act from 1 April 2025) and from TDSMAN, TaxGuru, Tax Garden and Terra Insight, whose guides apply them to section 393 of the 2025 Act. A threshold is shown only where at least two sources agree. Some sites quote a different rent figure; it is not used. Confirm on the e-filing portal before relying on it.