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Updated for Income-tax Act, 2025 | Tax Year 2026-27
TDS on Contractor Services: Code 1023 and 1024 Filing
Paying a contractor? From 1 April 2026, TDS on contractor payments is deducted under Section 393(1), Table Sl. No. 6(i), and the challan uses payment code 1023 for individual or HUF contractors and 1024 for all others. Choosing the wrong code can break your Form 140 and the contractor's credit. We handle the correct code, challan, quarterly return, and certificate for you.
- Code 1023: 1% | Code 1024: 2%
- Form 140 and Form 131 filing
- Trusted by 50,000+ customers
Fee for TDS on Contractor Services Filing
One simple fee covers the correct payment code, challan, quarterly return, and certificate. The TDS amount itself is paid separately to the government.
TDS Code 1023 | 1024 | Form 140
₹1000
/ certificate
- TDS computation at 1% or 2%
- Challan with payment code 1023 or 1024
- Quarterly TDS return (Form 140)
- TDS Certificate (Form 131)
Quick Answer: TDS Codes 1023 and 1024 for Contractors
Under Section 393(1), Table Sl. No. 6(i) of the Income-tax Act, 2025, TDS on contractor payments uses code 1023 for an individual or HUF contractor at 1% and code 1024 for any other contractor at 2%. TDS applies when a single payment exceeds ₹30,000 or yearly payments exceed ₹1,00,000. It is deposited by the 7th of the next month, reported in Form 140, and certified by Form 131.
TDS Payment Codes 1023 and 1024 Explained
The Income-tax Act, 2025 replaces the old section-based codes with numeric payment codes. For contractor payments, the code you choose depends on who the contractor is.
| Payment Code | Contractor Type | TDS Rate | Earlier Section |
|---|---|---|---|
| 1023 | Individual or HUF | 1% | Section 194C (challan code 94C) |
| 1024 | Company, firm, LLP, AOP, BOI, or other entity | 2% | Section 194C (challan code 94C) |
Tip: Always confirm the code on the live challan or TRACES screen before paying, because code lists can be updated.
Section 194C vs Section 393 for Contractor TDS
| Particulars | Earlier (Income-tax Act, 1961) | Now (Income-tax Act, 2025) |
|---|---|---|
| Governing provision | Section 194C | Section 393(1), Table Sl. No. 6(i) |
| Challan identification | Section code 94C | Payment code 1023 or 1024 |
| Quarterly TDS statement | Form 26Q | Form 140 |
| TDS certificate | Form 16A | Form 131 |
| Rates | 1% individual/HUF, 2% others | 1% individual/HUF, 2% others (unchanged) |
| Limits | ₹30,000 single, ₹1,00,000 yearly | ₹30,000 single, ₹1,00,000 yearly (unchanged) |
Payments credited or made up to 31 March 2026 follow the earlier law. Payments on or after 1 April 2026 follow the 2025 Act.
Which Contractor Services Are Covered Under Codes 1023 and 1024
Works and Labour Contracts
Construction, repair, installation, fabrication, and other work done under a contract.
Manpower and Labour Supply
Staffing, security, housekeeping, and contract labour supplied under a contract, expressly covered from 1 April 2026.
Service Contracts
Catering, transport, advertising, event management, and job work carried out for a client.
Sub-Contractors
A contractor who passes part of the work to another contractor must also deduct TDS from that payment.
Special case: A transport contractor who owns up to 10 goods carriages and gives a PAN declaration is generally not subject to TDS. Professional and technical fees are not contractor payments and use different codes.
Examples of TDS Under Code 1023 and Code 1024
| Payment | Contractor | Code | TDS |
|---|---|---|---|
| ₹4,00,000 for a construction contract | Partnership firm | 1024 | 2% = ₹8,000 |
| ₹1,50,000 for electrical work over the year | Individual contractor | 1023 | 1% = ₹1,500 |
| ₹25,000 single payment, ₹60,000 total in the year | Any contractor | None | No TDS, below both limits |
| ₹10,00,000 for staff supply, GST shown separately | Staffing company | 1024 | 2% = ₹20,000 |
How to File Contractor TDS Using Code 1023 or 1024
Identify the contractor type
Check the contractor's PAN and legal status. An individual or HUF falls under code 1023, and a company, firm, LLP, AOP, or other entity falls under code 1024.
Check the threshold
TDS applies when a single payment exceeds ₹30,000 or total payments to the contractor in the year exceed ₹1,00,000.
Deduct TDS at 1% or 2%
Deduct 1% for code 1023 and 2% for code 1024 at the earlier of credit or payment. Where GST is shown separately in the invoice, TDS is generally deducted on the amount without GST.
Deposit the TDS with the correct payment code
Pay through e-Pay Tax by the 7th of the next month and select payment code 1023 or 1024 so the challan matches the deductee type.
Report the deduction in Form 140
File the quarterly statement in Form 140 by 31 July, 31 October, 31 January, and 31 May, showing each contractor with the same code and challan details.
Issue Form 131 to the contractor
After Form 140 is processed, download Form 131 from TRACES and issue it within 15 days from the due date of the statement.
Due Dates for Contractor TDS Deposit, Form 140 and Form 131
| Quarter | Period | Form 140 Due | Form 131 Due |
|---|---|---|---|
| Q1 | April to June | 31 July | 15 August |
| Q2 | July to September | 31 October | 15 November |
| Q3 | October to December | 31 January | 15 February |
| Q4 | January to March | 31 May | 15 June |
TDS deducted in a month is generally deposited by the 7th of the following month. Example: TDS deducted in October 2026 is deposited by 7 November 2026, reported in the Q3 Form 140 due 31 January 2027, and certified by Form 131 by 15 February 2027.
Do Not Confuse Contractor Codes With Other Common TDS Codes
Using a contractor code for a professional fee, or the other way round, is one of the most common filing errors.
| Payment | Common Code | Earlier Section |
|---|---|---|
| Contractor, individual or HUF | 1023 | 194C |
| Contractor, others | 1024 | 194C |
| Technical services | 1026 | 194J |
| Professional fees | 1027 | 194J |
| Commission | 1006 | 194H |
| Rent | 1008 or 1009 | 194I |
Interest, Late Fee and Common Mistakes
| Default | Consequence |
|---|---|
| TDS not deducted on time | Interest at 1% per month or part of a month |
| TDS deducted but not deposited on time | Interest at 1.5% per month or part of a month |
| Late filing of Form 140 | Late fee of ₹200 per day, capped at the TDS amount |
| Wrong code, wrong PAN, or mismatched challan | Default notice and missing TDS credit for the contractor |
Contractors who receive these payments also need GST in place. See our guide to GST registration process for service providers and our GST return filing service with transparent pricing.
Not Sure Whether to Use Code 1023 or 1024?
Chat with our tax expert on WhatsApp. Share the contractor details and we will confirm the right code, rate, and filing steps.
Chat on WhatsApp: +91 98182 09246Frequently Asked Questions on TDS Codes 1023 and 1024
What are TDS payment codes 1023 and 1024?
They are the numeric payment codes used for TDS on payments to contractors under Section 393(1), Table Sl. No. 6(i) of the Income-tax Act, 2025. Code 1023 is for an individual or HUF contractor at 1%, and code 1024 is for any other contractor at 2%.
What is the difference between code 1023 and code 1024?
The difference is the type of contractor you pay. Use 1023 when the contractor is an individual or HUF, and use 1024 when the contractor is a company, firm, LLP, AOP, BOI, or other entity.
Which section replaced Section 194C for contractor TDS?
Section 393(1), Table Sl. No. 6(i) of the Income-tax Act, 2025 replaced Section 194C for payments made on or after 1 April 2026.
Which return form is used to report TDS on contractor payments?
Contractor TDS is reported in Form 140, the quarterly statement for non-salary payments to residents, which replaces Form 26Q. The TDS certificate given to the contractor is Form 131, which replaces Form 16A.
What is the threshold for TDS on contractor payments?
TDS applies when a single payment exceeds ₹30,000 or when total payments to the same contractor in the year exceed ₹1,00,000.
Is manpower supply covered under codes 1023 and 1024?
Yes. From 1 April 2026, supply of manpower or labour under a contract is treated as work, so payments to a staffing agency are reported under code 1023 or 1024 depending on the supplier type.
What if the contractor does not give a PAN?
TDS is deducted at a higher rate, generally 20%, instead of 1% or 2%. Always collect a valid PAN before the first payment.
Which code applies to professional or technical fees?
Professional and technical fees are not contractor payments. They use different codes, commonly 1027 for professional fees and 1026 for technical services, and different rates. Classify the contract correctly before choosing a code.
What happens if I use the wrong payment code on the challan?
A wrong code can cause a mismatch between your challan and Form 140, which may lead to a default notice or missing credit for the contractor. Correct it quickly through a challan correction or a revised statement, or ask us to fix it.
What are the due dates for contractor TDS deposit and return?
TDS deducted in a month is generally deposited by the 7th of the following month. Form 140 is due on 31 July, 31 October, 31 January, and 31 May, and Form 131 within 15 days after each due date.
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Apply NowThis page is for general information based on the Income-tax Act, 2025 and current guidance. Please confirm your specific case with a tax professional.