TDS on Advertisement Under Section 194C

According to Section 194C, payment to an advertising agency is liable for a TDS deduction. This can also include payments made to advertising agencies for magazines, newspaper publishing, advertisements, etc. Advertising agencies expressly refer to organisations dealing with procurement and ad campaigns (for online or print media). Let’s understand TDS's applicability, expense limit, and other critical aspects of the advertisement.

Budget 2025 update

The Union Budget 2025 proposed the rationalisation of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) to ease compliance challenges for taxpayers especially for middle-income earners. The government has raised the threshold limits across various TDS sections, aiming to simplify the tax process. The proposed changes are as follows

Section	Present	Proposed
193 - Interest on securities	NIL	10,000
194A - Interest other than Interest on securities	(i) 50,000/- for senior citizen; (ii) 40,000/- in case of others when payer is bank, cooperative society and post office (iii) 5,000/- in other cases	(i) 1,00,000/- for senior citizen (ii) 50,000/- in case of others when payer is bank, cooperative society and post office (iii) 10,000/- in other cases
194 – Dividend, for an individual shareholder	5,000	10,000
194K - Income in respect of units of a mutual fund	5,000	10,000
194B - Winnings from lottery, crossword puzzle Etc. & 194BB - Winnings from horse race	Aggregate of amounts exceeding 10,000/- during the financial year	10,000/- in respect of a single transaction
194D - Insurance commission	15,000	20,000
194G - Income by way of commission, prize etc. on lottery tickets	15,000	20,000
194H - Commission or brokerage	15,000	20,000
194-I - Rent	2,40,000 (in a financial year)	6,00,000 (in a financial year)
194J - Fee for professional or technical services	30,000	50,000
194LA - Income by way of enhanced compensation	2,50,000	5,00,000
206C(1G) – Remittance under LRS and overseas tour program package	7,00,000	10,00,000

Note: 

• The Tax Collected at Source (TCS) will be removed on remittances made for educational purposes when these remittances are financed through loans from specified financial institutions (Section 80E).
• The Tax Collected at Source (TCS) on the purchase of goods will be removed, effective from April 1, 2025.
• The higher TDS rate will only apply in cases where taxpayers do not provide PAN.

Understanding Section 194C and its Applicability

According to Section 194C of the Income Tax Act, if any individual pays a contractor to conduct a specific work, he/she must make a TDS deduction. For example, if you spend some amount on an advertising agency to bid on a contract, you must deduct TDS on advertisement expenses.

The below entities shall deduct TDS:

• A Central Government or State Government 
• Company
• Local Authority
• Trusts
• Co-operative Society
• Corporations established under Central, State, or Provincial Act
• Firm
• A university founded or incorporated under the respective State, Central, or Provincial legislation
• A Society incorporated under the Societies Registration Act, 1980
• An entity empowered by the Indian law that provides housing and accommodation and manages the development of villages, cities, and towns.
• An individual, AOP, BOI, or HUF has turnover, total sales, or gross receipts exceeding Rs 1 crore (if it’s business) or Rs 50 Lac (if it’s a profession).
• A Government of a foreign nation or a non-resident corporate body or other association of such foreign state
• An organisation registered under the Societies Registration Act, 1860.

What Does Work Mean under Section 194C?

The following list includes the work covered under section 194C:

• Broadcasting 
• Advertising
• Catering
• Carriage services for passengers and goods, excluding railways
• Service related to the production and supply of products from a customer using materials from the customer, as specified in section 40A(2).

Sub-Contractor Under Section 194C

A “sub-contractor” would mean any person:

• Who enters into a contract with the contractor for carrying out, or
• For the supply of labour for carrying out the whole or part of the work undertaken by the contractor under a contract with any of the authorities or
• For the supply of, whether wholly or partly, any labour which the contractor has undertaken to supply in terms of his contract with any of the authorities mentioned under this section.

TDS to a Sub-Contractor

According to the Income Tax Act provisions, TDS to a sub-contractor involves:

• Any individual who pays an amount to any resident sub-contractor
• Complying with a contractual agreement with the sub-contractor involving either the whole or partial execution of work commenced by the contractor or the workforce provision, whether wholly or partially, including any labour that the contractor has agreed to provide
• TDS upon crediting the funds to the sub-contractor account or TDS upon payment, whichever occurs first
• Deduct TDS at 1% in the case of Individual /HUF and 2% in the case of any other entity. 

When to Deduct TDS Under Section 194C?

If an individual pays a contractor or a sub-contractor, then TDS is to be deducted earlier of the following:

• When the payment is transferred to a contractor or subcontractor
• Upon payment 
• When the paid amount is credited to a suspense account of the contractor or sub-contractor

Instances Where TDS Under Section 194C is Not Applicable

As per Section 194C, TDS on advertising services doesn’t apply under the following cases:

• When the contract value is less than Rs.30,000 per contract 
• The amount that a person or HUF pays to a contractor/sub-contractor for personal purposes
• The total sum paid to the contractor doesn’t exceed ₹1,00,000 in a financial year.

TDS Rates

TDS on advertisements involves the below rates:

• A 2% deduction applies if the tax is to be paid to a resident (not an individual or HUF).
• A 1% deduction applies to payments released to a HUF or individual.
• 20% TDS applies in case the taxpayers don’t have a PAN card.

Date of Issuance for TDS Certificate

Those entities that deduct tax on payments other than salary must issue TDS certificates every quarter (in Form 16A). The following table shows the date of issuance of the TDS certificate:

Time Limit for Depositing TDS

The time limit for depositing TDS is the same day if the payment is released either by the Government or on behalf of the Government.

If the payment is released to people other than the Government, the time limit is as follows:

• The time limit is 30th April if the amount is paid in March
• For other months except for March, the time limit is seven days from the month's end (i.e. 7th of the next month), in which the amount was deducted.

Other Articles:
TDS on Transportation Charges
TDS on Reimbursement of Expenses