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Tier-1 auto-component manufacturers deduct TDS on every conversion-charge invoice from plating, heat-treatment, machining, painting and assembly job-workers under Section 393(1)(a) of the Income Tax Act 2025 (payment code 1002, replacing legacy Section 194C from 1 April 2026), at 1% for individual/HUF job-workers and 2% for company/LLP/firm job-workers, subject to thresholds of ₹30,000 per single contract and ₹1,00,000 aggregate per job-worker per financial year — and the principal must track cumulative payments per job-worker PAN to know exactly when the aggregate threshold is breached, deposit the deducted TDS on the prescribed challan by the 7th of the following month, file Form 168 quarterly, reconcile to each job-worker's Form 26AS / AIS reflection, and maintain a clean cross-reference to legacy Section 194C entries for Q4 FY 2025-26 and earlier.
Tag every job-worker in the master with PAN, legal form (individual/HUF/company/LLP/firm), GSTIN and applicable Section 393(1)(a) rate; capture every conversion-charge invoice and accumulate gross paid per PAN per financial year; check both thresholds (₹30,000 per invoice and ₹1,00,000 aggregate per FY) before each payment; deduct TDS on first breach and on every subsequent payment in the year; deposit on the monthly challan by the 7th with payment code 1002; file Form 168 quarterly with cumulative per-PAN totals; cross-reconcile to job-worker Form 26AS / AIS via PAN; maintain cross-era 194C ↔ 393(1)(a) cross-reference for at least one full FY cycle.
Job-worker master with PAN, GSTIN, legal form, applicable Section 393(1)(a) rate (1% or 2%) and Section 206AA fallback at 20% on missing-PAN; per-FY cumulative threshold tracker per PAN; monthly TDS challan calendar (7th of following month); quarterly Form 168 calendar; deductee invoice register with cross-era 194C / 393(1)(a) code mapping; reconciliation link to Form 26AS / AIS download per job-worker.
A live deductee dashboard per job-worker showing cumulative gross paid for the year, threshold-breach status, TDS deducted to date, challan deposit confirmation per month, Form 168 filed position per quarter, and the cross-tie to Form 26AS / AIS — with cross-era reconciliation to legacy 194C entries preserved through the FY 2026-27 cycle.
A Pune-based Tier-1 transmission-parts Tier-1 runs four plating and heat-treatment job-workers across the year — two of them companies, one an LLP, one an individual proprietor with a single-line workshop in Bhosari. The annual conversion-charge spend across them is around ₹40 lakh. On 7 May 2026 the controller has to reconcile the first month of new-Act TDS at payment code 1002 under Section 393(1)(a) of the Income Tax Act 2025, deposit the deducted amount on the monthly challan, hold the cumulative threshold tracker for each PAN through the year, file the first quarterly Form 168 by 31 July, and keep a clean cross-reference back to Q4 FY 2025-26 entries that were still under legacy Section 194C. This is Section 194C TDS auto component job work India in the new-Act language — same rate map, new statute, new code, same operational discipline.
Quick reference
| Element | Under Section 393(1)(a) (new) | Cross-era reference |
|---|---|---|
| Statute | Income Tax Act 2025 | Replaces Section 194C of Income Tax Act 1961 from 1 April 2026 |
| Payment code | 1002 | Legacy 194C codes apply to Q4 FY 2025-26 and earlier |
| Rate — individual / HUF job-worker | 1% | Same as legacy 194C 1% |
| Rate — company / LLP / firm / AOP / BOI | 2% | Same as legacy 194C 2% |
| Per-invoice threshold | ₹30,000 | Same as legacy ₹30,000 |
| Aggregate annual threshold per deductee | ₹1,00,000 per FY | Same as legacy ₹1,00,000 |
| Missing-PAN fallback (Section 206AA equivalent) | 20% | Same as legacy 20% |
| Deposit due date | 7th of the following month | Same as legacy |
| Quarterly statement | Form 168 | Replaces Form 26Q (non-salary) for new-Act entries |
| Deductee credit | Form 26AS / AIS | Same as legacy |
What changes on 1 April 2026
From 1 April 2026, every conversion-charge payment a Tier-1 makes to a job-worker — plating, heat-treatment, machining, painting, anodising, phosphating, assembly, sub-contracting — moves from legacy Section 194C of the Income Tax Act 1961 to Section 393(1)(a) of the Income Tax Act 2025, with TDS deducted at payment code 1002 on the challan and reported in Form 168. The substantive economics — rate, threshold, deposit cadence, deductee Form 26AS / AIS credit — are preserved; the statute, the payment code and the return are new. The wider statutory shift is set out in Section 393 TDS under the new Income Tax Act and the complete code map in TDS payment codes 1001–1092. This article focuses on the auto-component job-work application.
The auto-component industry sits squarely under Section 393(1)(a): every plating contract, heat-treatment contract, machining contract is a contract for work, payment for which attracts TDS. The Tier-1 is the deductor because it is the entity paying the conversion charge; the sub-vendor is the deductee. The same machinery sits under Tier-2 sub-vendor job-work reconciliation and ITC-04 filing, where the TDS leg runs alongside the Section 143 movement leg.
Rate by legal form of the job-worker
The Section 393(1)(a) rate structure splits on the legal form of the job-worker, not on its tax status:
- 1% where the job-worker is an individual or HUF — the small proprietor plater in Peenya, the family-run heat-treater in Bommasandra
- 2% where the job-worker is anything else — a company (private or public; Section 8 not-for-profit also attracts 2%), an LLP, a partnership firm, an AOP, a BOI or a local authority
The form-driven split makes the job-worker master a critical control. A wrong legal-form tag (an LLP coded as individual) under-deducts by 1%, exposes the Tier-1 to disallowance under Section 40(a)(ia) of the Act for the relevant year, and triggers interest under Section 201(1A). Conversely, an individual coded as a company over-deducts and forces an inconvenient refund cycle for the deductee.
A job-worker without a valid PAN — increasingly rare for established job-workers but still seen with very small operators — falls under the missing-PAN provision (the new-Act equivalent of legacy Section 206AA), with TDS at 20% on every payment until a valid PAN is furnished.
Thresholds — per invoice and per annum
Two thresholds run in parallel:
- Per single contract / single invoice: ₹30,000. A single conversion-charge invoice of ₹30,000 or more attracts TDS at the applicable Section 393(1)(a) rate.
- Aggregate per job-worker per financial year: ₹1,00,000. Once the running total of payments to a given job-worker PAN in the financial year crosses ₹1,00,000, TDS applies to that payment in full and to every subsequent payment in the year, regardless of whether each subsequent invoice individually crosses ₹30,000.
The aggregate threshold is the operationally harder of the two. A plating job-worker who bills ₹25,000 in April, ₹35,000 in May (per-invoice threshold crossed), ₹28,000 in June and ₹22,000 in July — at the July invoice the running total touches ₹1,10,000, breaching the aggregate threshold. From July onward, every payment carries TDS at the applicable rate. Some Tier-1s deduct TDS retrospectively on the cumulative-to-date amount at the threshold-breach point; others apply prospectively from the breach onward — the deductor’s policy must be consistent and disclosed.
Cumulative threshold tracking across multiple dispatches
For a Tier-1 running multiple job-workers across the year — typical setup includes 3-5 platers (different process certifications), 2-3 heat-treaters (induction vs furnace specialisation), 4-6 machinists (different tolerance classes), 1-2 painters — the cumulative tracker must run per PAN per FY. Two job-workers on the same plant premises but with different PANs are separate deductees; one job-worker with two GSTINs but a single PAN is one deductee. The master must hold:
- Job-worker PAN (the canonical identifier)
- Legal form (drives rate)
- GSTIN(s) for cross-reference to the GST invoice
- Applicable Section 393(1)(a) rate (1% or 2%)
- Cumulative gross paid in the current FY
- TDS deducted to date in the current FY
- Threshold-breach date for the year
Every conversion-charge payment posts to the per-PAN cumulative; threshold checks fire automatically; TDS is computed and booked at the same time as the payment liability is recognised. A monthly close confirms the cumulative position per PAN against the supplier ledger.
Form 168 reconciliation
Form 168 is the new-Act consolidated TDS / TCS quarterly statement — the operational successor to legacy Form 26Q for the non-salary TDS streams covered by the new Act. The deductor files Form 168 quarterly by the prescribed due date (typically by the end of the month following the quarter, mirroring legacy practice), reporting per deductee PAN:
- Cumulative gross paid to the PAN in the quarter (and year-to-date)
- TDS deducted in the quarter at payment code 1002
- Date of deduction
- Date of deposit
- Challan reference number (CIN)
The job-worker reads its own TDS credit through Form 26AS / AIS, populated from the deductor’s filing. A break between the Tier-1’s TDS register and the job-worker’s Form 26AS / AIS is the most common trigger for a job-worker tax-credit complaint and ultimately an inspector query. Reconciliation closes three legs:
- Internal TDS register (deductee, gross paid, TDS, deposit date)
- Challan deposit confirmation (CIN, amount, date)
- Form 168 filed (per deductee PAN totals)
- Form 26AS / AIS as the job-worker sees it (the external truth)
All four must agree on every deductee PAN for the quarter to be defensible.
Cross-era handling — Q4 FY 2025-26 and the boundary
Q4 FY 2025-26 (1 January 2026 to 31 March 2026) deductions sit under legacy Section 194C of the Income Tax Act 1961 and are reported on legacy Form 26Q with the legacy 194C identifiers. The substantive rates and thresholds are identical; only the statute and the form differ.
The boundary work happens on payments straddling 31 March 2026:
- A conversion-charge invoice dated 25 March 2026 and paid 8 April 2026 — the date of payment governs the time of deduction under both Acts; the deduction therefore falls under Section 393(1)(a) code 1002 (new Act) because payment was made post-1-April-2026.
- A conversion-charge invoice dated 25 March 2026 and paid 28 March 2026 — both events pre-1-April-2026; the deduction sits under legacy Section 194C and reports on Form 26Q.
- The annual cumulative ₹1,00,000 threshold straddling the year-end — for FY 2025-26 the cumulative ran on legacy 194C; for FY 2026-27 a fresh cumulative starts on 1 April 2026 under Section 393(1)(a). There is no carry-forward of the cumulative across the year-end. So a job-worker who crossed the threshold in October 2025 and continued to attract 194C through March 2026 starts a fresh ₹1,00,000 cumulative on 1 April 2026 under code 1002 — TDS does not apply on payments in April–June 2026 until the new cumulative threshold is breached.
Reconciliation must keep a cross-era cross-reference alive through at least the full FY 2026-27 cycle, because Form 26AS / AIS for the deductee continues to display both eras for some time, and any deductee-side dispute on a prior-period TDS credit reopens the legacy-194C deduction register.
TDS payment code lookup
Confirm code 1002 for contractor / job-work payments under Section 393(1)(a) of the Income Tax Act 2025 — and the rest of the 1001–1092 map at a glance.
Open the TDS payment code lookup →Section 393(1)(k) vs 394 threshold determiner
When a job-work spend touches scrap-credit netting or material-purchase boundaries, resolve which provision bites — contractor TDS at 1002, purchase TDS at 1012, or scrap TCS at 1071.
Open the threshold determiner →Worked example — ₹40 lakh annual plating-job-work spend across 4 platers
A Pune Tier-1 transmission-parts manufacturer runs four plating and heat-treatment job-workers in FY 2026-27, with the following profile:
| Job-worker | Legal form | Rate | Approx. annual spend |
|---|---|---|---|
| Plant A — company (zinc plating) | Company | 2% | ₹16,00,000 |
| Plant B — LLP (heat-treatment) | LLP | 2% | ₹12,00,000 |
| Plant C — partnership firm (electroless nickel) | Firm | 2% | ₹8,00,000 |
| Plant D — individual proprietor (selective plating) | Individual | 1% | ₹4,00,000 |
| Total | ₹40,00,000 |
Monthly TDS computation for a typical April-2026 close, where the cumulative thresholds have been re-set on 1 April:
April-2026 invoices received:
- Plant A: ₹1,40,000 (single invoice). Per-invoice threshold ₹30,000 crossed; cumulative now ₹1,40,000, aggregate threshold ₹1,00,000 crossed. TDS at 2% on ₹1,40,000 = ₹2,800 under code 1002.
- Plant B: ₹95,000 (single invoice). Per-invoice threshold crossed; cumulative ₹95,000, below aggregate. TDS at 2% on ₹95,000 = ₹1,900 under code 1002.
- Plant C: ₹62,000 (single invoice). Per-invoice threshold crossed; cumulative ₹62,000, below aggregate. TDS at 2% on ₹62,000 = ₹1,240 under code 1002.
- Plant D: ₹28,000 (single invoice). Per-invoice threshold ₹30,000 not crossed; cumulative ₹28,000, below aggregate. No TDS this month.
April-2026 total TDS deducted: ₹5,940, deposited on the monthly challan by 7 May 2026 with payment code 1002 against each deductee PAN. Each deduction posts to the per-PAN running register; cumulative trackers update.
May-2026 Plant B aggregate hits ₹2,15,000 (above ₹1,00,000), so deduction continues on every payment. Plant D crosses the ₹30,000 per-invoice threshold in May with an invoice of ₹38,000 — TDS at 1% (individual) on ₹38,000 = ₹380 — and the cumulative for Plant D moves to ₹66,000, still below the aggregate threshold, but every subsequent invoice in the year will need a check against the aggregate at the time of payment.
Quarterly Form 168 (Q1 FY 2026-27, due by 31 July 2026) consolidates the per-PAN totals across April, May and June — gross paid, TDS deducted, challan deposit confirmation per month — and files at code 1002 against the four PANs. The job-workers see their TDS credit in Form 26AS / AIS within a few weeks of filing.
Cross-era cross-reference to Q4 FY 2025-26. Plant A continued from FY 2025-26, where its cumulative under legacy Section 194C had crossed the ₹1,00,000 threshold in November 2025 and every subsequent invoice through March 2026 carried 2% TDS at legacy 194C codes on Form 26Q. From 1 April 2026 the cumulative reset under Section 393(1)(a); the first April invoice ₹1,40,000 single-handedly re-breached the new aggregate threshold. The reconciliation register tags both eras with their respective code and statute, and any Plant A query on Form 26AS / AIS across the year-end can be answered against either era’s deduction record.
Where the TDS reconciliation tightens
A robust per-PAN TDS dashboard tightens four control points that the manual register tends to miss:
- Threshold-breach precision. The exact invoice that crosses ₹1,00,000 aggregate — and whether deduction is then made retrospectively on the threshold-breaching invoice or prospectively from the next — must be policy-driven and consistent across the year.
- Legal-form drift. A job-worker that converts from a proprietorship to an LLP or a private company changes its applicable rate from 1% to 2%. The master must capture the conversion date and apply the new rate prospectively from that date.
- Missing-PAN exposure. New job-workers added mid-year without a verified PAN attract 20% on every payment from day one. The procurement onboarding must validate PAN before the first dispatch.
- Cross-era reconciliation. Through at least FY 2026-27, every deductee will have both legacy 194C and new code-1002 entries in Form 26AS / AIS. The Tier-1’s deduction register must be reconcilable both ways — at any audit query.
How this rail ties into the wider auto stack
Section 393(1)(a) code 1002 TDS on conversion charges is the tax leg of every Section 143 job-work flow. It sits alongside the ITC-04 filing goods-movement reconciliation, the Tier-2 sub-vendor job-work reconciliation physical four-way match, and the automotive component manufacturing reconciliation sub-pillar. For the consolidated payment-code framework see TDS payment codes 1001–1092 and the wider statutory shift in Section 393 TDS under the new Income Tax Act. For statutory text, Form 168, and the deductee credit framework see the Income Tax portal.
What automated reconciliation changes
Manual TDS tracking across 10-20 job-worker PANs running cumulative thresholds, legal-form changes mid-year, and the cross-era 194C ↔ 393(1)(a) split is where Section 40(a)(ia) disallowance exposures hide until the assessment year. Purpose-built reconciliation software India holds the per-PAN cumulative live, fires threshold-breach flags before the payment is released, computes the correct rate by legal form, posts the deduction to code 1002 (or legacy 194C codes for cross-era), reconciles to the monthly challan, generates the Form 168 pack, and ties each PAN to its Form 26AS / AIS reflection. TransactIG carries 24+ industry presets including a configuration for Section 393(1)(a) job-work TDS and cross-era reconciliation. Customer outcomes include match-rate improvement from 51% to 88%. Build is two-to-four weeks on AWS Mumbai (ISO 27001:2022). For the inbound match discipline see three-way matching software India.