Tax
TDS on contract payments is charged at one rate for individuals and a different one for companies.
The payment
The contractor payment before deduction, in your local currency.
TDS applies only when the payment exceeds this amount.
Who is being paid
Payee type determines the rate used.
Rate for an individual / HUF payee. Example only — verify.
Rate for a company / firm payee. Example only — verify.
TDS Amount
5,000.00
Tax deducted at source on the contractor payment.
Formula verified 13 September 2026
Net Payment
495,000
What the contractor receives after deduction.
Rate Applied
1.00%
The rate used, based on the payee type.
Above Threshold? (1 = yes)
1
1 means the payment exceeds the threshold, so TDS applies.
Educational estimate only — verify rates with your official tax authority. Read the full disclaimer ↓
Estimates only — not financial, tax, or professional advice.
100% private — every number you enter is calculated in your browser and never sent to our servers.
What it calculates: TDS Amount, Net Payment, Rate Applied, Above Threshold? (1 = yes).
Updated 5 June 2026 · Transparent assumptions
Payments to an individual or Hindu undivided family contractor carry a lower TDS rate than payments to a company or firm for identical work. The distinction is the legal status of the recipient, not the nature of what they did.
Getting it wrong in either direction causes problems: under-deducting leaves the payer liable for the shortfall plus interest, and over-deducting leaves the contractor chasing a refund for a year.
Contract TDS typically has a single-payment threshold and a separate, higher annual aggregate threshold for the same recipient. Crossing either one creates the obligation.
The aggregate test is the one usually missed. A series of payments each below the single-payment limit still triggers deduction once the year’s total passes the aggregate, and the obligation covers the whole amount from that point.
This section covers payments for carrying out work — construction, manufacturing to specification, advertising, catering, transport. Professional and technical services fall under a different section at a materially higher rate.
The classification matters more than the label on the invoice. A payment described as a contract but substantively for professional services is deductible at the professional rate, and a tax officer will apply the substance.
For a works contract where the customer supplies materials, TDS may apply only to the labour component provided the invoice separates the two. Where materials are not separately stated, deduction is on the gross amount.
This is worth structuring correctly at the invoice stage. A combined invoice can leave a contractor with TDS deducted on material costs they simply passed through, which is real cash locked up for a year.
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Tax disclaimer
Tax rules vary by country, state, tax year, filing status, income type, deductions, and exemptions. This calculator is educational and uses the values you enter. Always verify final tax treatment with official sources or a qualified tax professional.
How we calculate · Found an error? email us
Published 13 September 2026