Neutral impactOrders & Deals
Are you building a house or commercial property? Know when TDS applies to contractor payments under Income Tax Act 2025
Mint 1 hr ago·4 Oct 2026, 5:01 pm
The Finance Ministry’s Income Tax Act 2025 now mandates tax deducted at source (TDS) on payments to contractors for construction, repair or renovation work. A payer must withhold 1% of the invoice amount for individual contractors and 2% for firms, provided a single payment exceeds ₹30,000 or the total paid to the same contractor in a financial year crosses ₹1 lakh. The rule applies to both residential and commercial projects, with separate thresholds for individuals and Hindu Undivided Families (HUFs).
For investors, the change can affect cash‑flow timing and profitability of companies in real‑estate, infrastructure and related sectors. Contractors may face higher compliance costs, and developers could see delayed payments as they adjust to the new withholding process, potentially influencing quarterly earnings.
Market participants should monitor any further clarifications from the tax department, especially regarding the enforcement timeline and possible adjustments to the rates. Watching company disclosures for TDS impact in earnings releases will help gauge the practical effect on margins and working capital.
Key takeaways
- Category: Orders & Deals.
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