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A business pays many small repair and AMC bills and is unsure whether they attract TDS and under which section.
Classify by the nature of the work: upkeep and repair is contract work; specialised technical service may be a technical fee; spares shown separately are usually excluded.
Vendor master with nature of work, section, PAN and a running yearly total per vendor.
Correct TDS on repair and AMC bills, including those that cross the yearly limit.
Usually yes. Repair, servicing and annual maintenance contract (AMC) bills are normally payments to a contractor for work done, so contractor TDS (tax deducted at source) applies once the limits are crossed. An AMC that is mainly specialised technical support can instead be a fee for technical services. The nature of the work decides, not the word “AMC” on the invoice.
Which section applies to each type of bill?
Under the Income-tax Act 1961, contractor work falls in Section 194C (1% for individuals and HUFs, 2% for others) and technical fees in Section 194J (2%). From 1 April 2026 both sit in Section 393 of the Income-tax Act 2025.
| Bill type | Likely section | TDS base | Note on spares |
|---|---|---|---|
| Machine repair with spares | 194C | Labour, if spares shown separately | Spares excluded only if itemised |
| Civil repair (painting, plumbing) | 194C | Whole bill excluding GST | Material usually part of the work |
| IT hardware AMC | 194C | Whole AMC fee | Spares often extra, itemised |
| Software support or tuning by engineers | Often 194J technical | Whole fee | Not usually relevant |
| Housekeeping AMC | 194C | Whole fee | Consumables usually included |
| Vehicle servicing at a workshop | 194C | Labour, if parts itemised | Parts itemised on the job card |
Rates and limits here are for the 1961 Act and carry forward; check the current figures before you deduct.
How are spares treated when billed with labour?
Under the contractor rules, where the invoice shows the cost of materials separately from labour, TDS is usually on the labour part only. If the vendor bills one lump sum covering both, TDS is on the whole amount. So ask regular repair vendors to itemise parts and labour. It reduces the TDS you deduct and makes the bill easier to check.
Worked example: a ₹1,18,000 repair bill
A dairy’s chiller unit was repaired by a firm. The invoice was ₹1,18,000.
| Line | Amount |
|---|---|
| Labour | ₹60,000 |
| Spare parts | ₹40,000 |
| GST at 18% | ₹18,000 |
| Total | ₹1,18,000 |
GST is 18% of ₹1,00,000, so ₹18,000. The firm is not an individual, so the rate is 2%.
| Billing | TDS base | TDS at 2% | Paid to vendor |
|---|---|---|---|
| Labour and parts shown separately | ₹60,000 | ₹1,200 | ₹1,16,800 |
| One combined line of ₹1,00,000 plus GST | ₹1,00,000 | ₹2,000 | ₹1,16,000 |
Either way GST stays out of the base. The bill crosses ₹30,000, so TDS applies even if this is the only bill this year.
What if each AMC invoice is under the limit but the vendor total is over it?
Add up all bills to that vendor in the year. Say an office pays a lift AMC of ₹28,000 a quarter. Each bill is under ₹30,000, but four bills make ₹1,12,000, above the ₹1,00,000 yearly limit. TDS applies once the total crosses ₹1,00,000. In practice, most firms deduct from the first bill once they expect the year to cross the limit, which avoids a large catch-up deduction and interest under Section 201(1A).
What to read next
- Next: full rules in TDS on contractor payments under Section 194C.
- The GST question: TDS on the GST component of an invoice.
- For any new bill type, use the five-question test.
TransactIG reconciles TDS against vendor bills and payments, and flags vendors whose yearly total has crossed the limit without deduction.