TDS Section 393(1) Codes 1023/1024 for Textile Job-Work

A national branded apparel manufacturer’s tax controller closes the June quarter on 30 June with 47 active job-worker relationships across four regional clusters — Tiruppur for knitwear stitching, Bhilwara for wool-blend suiting weaving and dyeing, Ludhiana for hosiery cutting and finishing, and Surat for polyester and synthetic printing. Quarterly job-work spend for the network totals approximately ₹2.1 crore across roughly 180 conversion invoices, and every invoice must be classified against a single boundary test embedded in Income-tax Act 2025 Section 393(1) Sl. 4 — was the raw material supplied by the principal, or not. If yes, the invoice draws payment code 1023. If no, it draws payment code 1024. On the same garment chain, the answer can flip between hops. The dyer that receives brand-supplied grey fabric and returns dyed fabric under a Rule 55 CGST delivery challan is a code 1023 counterparty; the embroidery contractor that sources its own fabric and thread and supplies finished embroidered panels is a code 1024 counterparty. This is TDS Section 393 code 1023 1024 textile job work at production scale, and the classification discipline is what closes the Form 26Q filing cleanly against Form 26AS at every job-worker PAN.

Quick reference

The reconciliation in one paragraph

Section 393(1) Sl. 4 of the Income-tax Act 2025 splits job-work TDS into two payment codes based on a single test — whether the principal supplies the raw material to the job worker. Code 1023 applies where material is principal-supplied; the transaction is a pure conversion service (the material remains principal-owned throughout, documented on Rule 55 CGST delivery challans, and moves under Section 143 CGST job-work provisions). Code 1024 applies where material is not principal-supplied; the job worker sources its own material and charges an integrated price. Both codes carry the same rate slab — 1 percent for Individual or HUF resident job worker, 2 percent for other resident — and the same threshold structure of a single payment above ₹30,000 or aggregate payments above ₹1,00,000 to the same deductee PAN in a financial year. The deductor reports every job-work TDS deduction in Form 26Q Annexure I with the payment code; issues Form 16A to the job worker; and reconciles against Form 26AS at the job-worker PAN to close the compliance loop. In a textile chain, the boundary test can flip between hops — a dyer receiving brand-supplied grey fabric is code 1023, an embroidery contractor supplying own thread and fabric is code 1024, and the two codes appear on the same garment’s cost sheet.

What the code 1023 versus code 1024 network looks like in Indian textile brands

A tier-1 vertically integrated textile principal — Vardhman Textiles, Trident Ltd, Arvind Ltd, Raymond, Welspun India, KPR Mill, Aditya Birla Fashion and Retail (Pantaloons, Allen Solly, Van Heusen) — that runs spinning, weaving, and dyeing in-house sends the shorter tail of the conversion chain out to job-workers — typically cutting, stitching, embroidery, and finishing. In this shape, the majority of job-worker relationships are code 1023 (the principal supplies cut panels or dyed fabric) with a small perimeter of code 1024 (specialised embroidery contractors that supply their own thread; small finishing contractors that add trims from own inventory).

A tier-2 specialist textile principal — Page Industries (Jockey), Shahi Exports, Gokaldas Exports, Indo Count Industries, Himatsingka Seide, Lux Industries, Rupa and Co, Dollar Industries, Siyaram Silk Mills, Donear Industries, Garware Technical Fibres, Filatex India, Sutlej Textiles, Banswara Syntex, Bombay Dyeing, Pearl Global Industries, Reliance Industries polyester — that sources yarn from a partner spinner (or from Cotton Corporation of India at MSP for cotton-heavy chains) and runs the entire conversion through partner job workers operates the full five-hop pattern with code 1023 as the dominant classification across weaving, dyeing, cutting, and stitching relationships, and code 1024 sitting at the perimeter for finishing suppliers and embroidery contractors.

A branded apparel manufacturer — Trent Ltd (Westside, Zudio), Reliance Retail (Reliance Trends, AJIO), Myntra, Flipkart Fashion, Nykaa Fashion — that operates a hybrid model of own-brand production plus supplier-brand purchase mixes the two codes at the vendor level. Own-brand production runs primarily on code 1023 (brand supplies fabric to a stitching partner). Supplier-brand purchase is not a job-work transaction at all — it is a purchase of goods, and the TDS provision is Section 393(1) Sl. 8 code 1031 (Section 194Q successor) at 0.1 percent above the ₹50 lakh per FY aggregate threshold rather than the job-work code 1023/1024.

Regional cluster geography — Tiruppur (knitwear stitching, small Ind/HUF units dominate → code 1023 at 1 percent), Karur (home-textile weaving and stitching), Ludhiana (winter knitwear and hosiery cutting), Panipat (home furnishings and terry towels), Surat (synthetic printing and processing, larger partnership units → code 1023 at 2 percent), Bhilwara (wool-blend suiting weaving and dyeing), Coimbatore and Erode (cotton spinning and weaving), Solapur (jacquard weaving) — determines both the material-supplied-flag distribution (whether the local job-worker profile leans toward the principal-supply model or the own-material model) and the residency-type distribution (Ind/HUF proprietor units versus partnership firm units) which drives the 1 percent versus 2 percent rate slab.

The regulatory overlay — Section 393(1) Sl. 4 codes 1023 and 1024

Section 393(1) of the Income-tax Act 2025 is the modern successor taxonomy to legacy Sections 192 through 206CC of the Income-tax Act 1961, restating the TDS regime in a coded structure. Sl. 4 (the fourth serial line of the section’s schedule) enumerates the job-work-related payment codes. Code 1023 is the material-supplied job-work code; code 1024 is the material-not-supplied job-work code. Both replace the payment-to-contractors and payment-for-work provisions of legacy Section 194C, which used Explanation III to define work as manufacturing or supplying a product according to the requirement or specification of a customer by using material supplied by such customer — the anchor for the material-supplied classification carried into code 1023.

The rate slab is uniform between the two codes — 1 percent for a resident deductee who is an Individual or HUF, and 2 percent for any other resident deductee (partnership firm, LLP, company, cooperative society, association of persons, body of individuals, artificial juridical person). The 1 percent slab dominates in Tiruppur, Ludhiana, and small-town stitching clusters where sole-proprietor units are the norm; the 2 percent slab dominates in Bhilwara, Surat, and larger integrated processing units where partnership firms and companies operate.

The threshold is single payment above ₹30,000 or aggregate payments above ₹1,00,000 to the same deductee PAN in a financial year. The aggregate rule is the more common trigger for high-frequency, low-value job-work engagements — a brand paying an embroidery contractor ₹15,000 to ₹25,000 per invoice across a dozen orders in a quarter will not hit the single-payment threshold but will cross the ₹1,00,000 aggregate mark somewhere in the middle of the quarter. Once the aggregate crosses, TDS applies retrospectively on every payment made in the FY to that PAN, not prospectively from the crossing invoice.

The reporting return is Form 26Q, Annexure I. Every deduction is reported line-by-line with the payment code (1023 or 1024), deductee PAN, deductee name, TAN of the deductor, section reference (393(1) Sl. 4), date of payment or credit, gross amount paid or credited, TDS amount deducted, and challan reference number for the TDS deposit. Filing due dates are 31 July for Q1 (April to June), 31 October for Q2 (July to September), 31 January for Q3 (October to December), and 31 May for Q4 (January to March). Form 16A is the TDS certificate issued by the deductor to the deductee after each quarter, downloadable from TRACES for the corresponding quarter. The deductee’s Form 26AS reflects the credit against the deductee PAN, showing the deductor TAN, payment code, gross amount, and TDS credited.

Rule 55 of the Central Goods and Services Tax Rules 2017 is the companion GST provision — it requires that movement of principal-supplied material to a job worker be documented on a delivery challan issued in Form GST INS-01 in triplicate. The Rule 55 challan is the primary documentary evidence that establishes the material-supplied fact anchoring the code 1023 classification. If the Rule 55 challan chain is broken (the material was billed as a sale rather than a movement, or the delivery challan is missing), the audit-defensibility of the code 1023 classification weakens and the transaction may be re-classified by the tax officer as a purchase (code 1024 or Section 194Q code 1031) with consequent TDS and GST re-computation.

Section 143 CGST runs alongside code 1023 — every principal-supplied material dispatch carries a 1-year deemed-supply clock. If the material (or the value-added output) is not received back at the principal’s premises or supplied directly from the job-worker premises within 1 year of the original dispatch, the entire original dispatch is retro-treated as a supply on the dispatch date, and GST becomes payable with interest. Code 1023 relationships must therefore carry both the TDS discipline (correct code, correct rate, timely deduction, correct 26Q reporting) and the GST discipline (Rule 55 challan chain, ITC-04 quarterly filing, Section 143 clock tracking) as an integrated compliance surface.

A worked example — a national branded apparel manufacturer’s FY 2026-27 Q1 job-work network

Illustrative — the following figures represent the operating pattern of a representative national branded apparel manufacturer of the scale that a specialist tier-2 firm operates. Public disclosures do not reveal internal job-worker classification distributions; cross-verify against your own job-worker master before action.

A national branded apparel manufacturer with approximately ₹500 crore turnover runs 47 job-worker relationships across four regional clusters for the June 2026 quarter, aggregating roughly ₹2.1 crore in conversion charges across approximately 180 invoices. The job-worker master, keyed by PAN and GSTIN, splits the network as follows.

32 material-supplied relationships (code 1023) — the majority. The brand supplies grey fabric to weavers in Bhilwara, dyed fabric to cutting units in Tiruppur, cut panels to stitching units in Ludhiana and Tiruppur, and dyed fabric to printers in Surat. Each of these 32 relationships carries a Rule 55 CGST delivery challan chain documenting the material movement. Q1 spend across these 32 relationships is approximately ₹1.35 crore across roughly 120 invoices. Residency-type split — 24 relationships are Individual or HUF (Tiruppur and Ludhiana pattern), attracting 1 percent TDS; 8 are other resident (partnership firms and small companies in Bhilwara and Surat), attracting 2 percent TDS. Weighted average TDS on the ₹1.35 crore is approximately 1.7 percent based on invoice-weighted split, but for the payable-computation illustration we apply the 2 percent nominal maximum — TDS deducted at code 1023 approximates ₹2.7 lakh across the quarter (with the actual amount closer to ₹2.3 lakh on the weighted-average basis).

15 material-not-supplied relationships (code 1024) — the perimeter. These include embroidery contractors in Bhilwara that supply own thread and finish embroidery arrangements on the brand’s design, small finishing suppliers in Ludhiana that supply own trims and packaging, and specialised print-design converters in Surat that source own fabric for limited-run screen-printing arrangements. Q1 spend across these 15 relationships is approximately ₹75 lakh across roughly 60 invoices. Residency split — 9 Ind/HUF at 1 percent, 6 other resident at 2 percent. TDS deducted at code 1024 approximates ₹1.5 lakh at nominal 2 percent maximum; closer to ₹1.2 lakh on weighted-average basis.

Multi-hop application on one garment SKU. For the summer 2026 women’s kurta collection order of 40,000 units, the brand runs a two-hop chain. Hop-1 is a dyer in Bhilwara that receives brand-supplied grey fabric (2,800 kg of cotton-blend) under Rule 55 challan reference JW/25-26/00147 and returns dyed fabric under Rule 55 return-inward challan JW/D/25-26/00034. The dyer is a partnership firm — TDS at code 1023, rate 2 percent, on the ₹4.2 lakh conversion invoice — ₹8,400 remitted to TRACES against the dyer’s PAN, reported in Q1 Form 26Q Annexure I under code 1023, Form 16A issued 15 August 2026, dyer’s Form 26AS at PAN reflects the credit by month-end August. Hop-2 is an embroidery arrangement — but for this SKU the brand engages an embroidery contractor in Bhilwara that sources its own thread and additional overlay fabric and supplies embroidered panels. The transaction is a purchase-of-embroidered-panel, and TDS is deducted at code 1024, rate 2 percent (contractor is a partnership firm), on the ₹5.8 lakh invoice — ₹11,600 remitted to TRACES against the embroidery contractor’s PAN, reported in Q1 Form 26Q Annexure I under code 1024. The two codes appear on the same garment’s cost sheet.

Aggregate threshold cascade. Consider a small embroidery contractor in Tiruppur (sole proprietor, PAN ending in F) that received 8 orders in Q1, each invoice between ₹12,000 and ₹18,000, total Q1 payments ₹1,08,000 at the time of the eighth invoice on 27 June 2026. No single invoice crossed the ₹30,000 single-payment threshold, but the aggregate crossed ₹1,00,000 on the eighth invoice — TDS becomes payable retrospectively on the aggregate ₹1,08,000 at code 1023, rate 1 percent (Ind/HUF), which is ₹1,080. Deduction is applied on the eighth invoice’s net payable and remitted with the June TDS deposit challan. From the ninth invoice onwards, TDS deducts at 1 percent on every subsequent payment to the same PAN in FY 2026-27.

Form 26Q filing draft for Q1 (April-June 2026) — the reconciliation platform’s Annexure I extract sums to approximately ₹4.2 lakh in job-work TDS deducted at code 1023 across 32 material-supplied relationships, plus approximately ₹1.5 lakh at code 1024 across 15 material-not-supplied relationships. Separate Annexure I lines carry code 1014 for freight vendors (transporter contractors engaged separately for material movement between spinner and weaver) and code 1021 for one external testing lab (SITRA in Coimbatore that ran fabric quality tests for the summer collection, code 1021 at 10 percent). The full Q1 26Q filing is due 31 July 2026; Form 16A downloads and issuances complete by 15 August 2026; Form 26AS reconciliation at every job-worker PAN completes by month-end September 2026.

Common reconciliation breakages

Five breakages recur across textile brands running Section 393(1) code 1023/1024 job-work networks, and each maps to a specific control failure.

• Material-supplied flag flip mid-relationship. A job-worker relationship starts as code 1023 (brand supplies fabric) and, mid-year, shifts to code 1024 (brand starts sourcing the finished panel from the same contractor who now supplies own material). If the brand’s job-worker master carries a single flag per PAN, the code reported in Q3 will conflict with the code reported in Q1 for the same deductee, producing a Form 26AS at the deductee’s PAN with mixed credits that require the deductee to raise a rectification query. The correct discipline is to model the relationship as two separate engagement lines, each with its own code, though sharing the deductee PAN.

• Aggregate threshold missed on high-frequency, low-value contractors. A Tiruppur stitching sole proprietor receiving ₹15,000 per invoice across 8 to 12 invoices in a quarter crosses the ₹1,00,000 aggregate threshold on the seventh or eighth invoice. Brands that check the single-invoice threshold but not the aggregate miss the crossing, do not deduct TDS from the seventh invoice onwards, and face Section 201/201(1A) short-deduction interest and penalty at the year-end 26AS reconciliation.

• Freight leg mis-classified into code 1023. When the freight for movement of brand-supplied cotton or yarn between spinner and weaver is contracted separately with a transport contractor (rather than being subsumed within the weaver’s charge), the freight leg attracts Section 393(1) Sl. 4 code 1014 (the 194-IA successor for freight of cotton and yarn) at 2 percent or 1 percent per counterparty type, not code 1023. Mis-classifying the freight leg as job-work code 1023 files a wrong Annexure I line and shows up as a Form 26AS mismatch at the transporter’s PAN.

• Purchase transaction mis-classified as code 1024 instead of Section 194Q code 1031. When the brand purchases finished dyed fabric from a dyer who sources own grey (or finished garment from a supplier who sources own fabric), the transaction is a purchase of goods rather than a job-work service. Above the ₹50 lakh per FY per seller aggregate, Section 393(1) Sl. 8 code 1031 (the 194Q successor) applies at 0.1 percent. Reporting the transaction under code 1024 at 2 percent over-deducts TDS and produces a mismatch at the supplier’s Form 26AS.

• Rule 55 CGST delivery challan chain broken. Where a code 1023 relationship’s material-supplied fact is not documented by a Rule 55 delivery challan chain (INS-01 outbound and return-inward pairs), audit-defensibility of the code 1023 classification weakens. A tax officer during Section 65 GST audit or Section 143(3) income-tax scrutiny may re-classify the transaction and demand differential TDS, GST, interest, and penalty. The Rule 55 challan is the primary evidentiary bridge between GST-side job-work discipline and income-tax-side TDS classification.

How a reconciliation platform handles this

A purpose-built textile TDS reconciliation platform maintains the job-worker master as a first-class object with PAN, GSTIN, residency type, material-supplied flag, applicable Section 393(1) payment code (1023, 1024, 1014, 1021, or 1031), TDS rate slab, threshold tracker (single ₹30,000 and aggregate ₹1,00,000 per FY per PAN), and the Rule 55 CGST delivery challan cross-reference for every code 1023 relationship. At every conversion invoice, the platform looks up the job-worker relationship, applies the correct code and rate, updates the aggregate tracker, and generates the TDS deposit challan with the correct payment code. At quarter-end, the platform produces the Form 26Q Annexure I draft split by payment code — 1023 lines for material-supplied job-work, 1024 lines for material-not-supplied, 1014 for freight vendors, 1021 for professional/technical services, 1031 for purchase of goods above 194Q threshold — and issues Form 16A to every deductee after the quarter with the correct code. The reconciliation against Form 26AS at every job-worker PAN closes the loop by month-end after the filing quarter, flagging mismatches for correction filing before year-end. The platform’s alert threshold at ₹80,000 aggregate paid to any code 1023 or 1024 PAN in the FY (80 percent of the ₹1,00,000 aggregate threshold) prompts pre-emptive deduction on the next invoice rather than retrospective correction. Match rate improvement of 51 to 88 percent on the 26Q-to-26AS reconciliation, combined with ISO 27001:2022 posture and DPDP Act 2023 aligned data handling, is what makes the platform an infrastructure investment rather than a spreadsheet substitute for a 47-job-worker network.

Cross-cluster bridges and where to read next

The code 1023 versus code 1024 boundary in this article closes the TDS-side classification of the textile job-work chain covered in multi-hop job-work reconciliation for textile manufacturing. For the specific hop application on a dyeing invoice, see dyeing and printing job-work TDS code 1023. The freight leg mis-classification is covered in depth at TDS on cotton and yarn freight — Section 194C code 1001. The companion GST-side surface — Rule 55 delivery challan, ITC-04 quarterly return, Section 143 CGST 1-year clock — is covered in Rule 55 delivery challan for textile job-work movement, ITC-04 quarterly return textile job-work reconciliation, and Section 143 deemed-supply 1-year rule for textile job-work. Free-issue reconciliation for principal-supplied trims and packaging is at free-issue yarn and fabric job-work reconciliation. Regional cluster context is in Tiruppur knitwear cluster reconciliation, Ludhiana hosiery cluster reconciliation, Panipat home textile reconciliation, Tiruppur knitwear export reconciliation, and Surat synthetic saree domestic and export reconciliation. The e-invoicing and customs overlays are covered in e-invoicing textile ₹5 crore threshold IRN reconciliation and customs BCD on cotton and MMF textile import reconciliation. The rate-rationalisation impact on job-work invoicing is in GST textile rate rationalisation September 2025 impact. The corporate-tax overlay for PLI claim tax treatment is in MAT AMT PLI textile claim tax treatment reconciliation. For OEKO-TEX and GOTS certification-side reconciliation, see OEKO-TEX and GOTS compliance reconciliation for Indian textile. The commercial pillar for the entire textile cluster is Textile reconciliation software India; the broader authority is reconciliation software India.

The five FAQs below address the operational questions Indian textile brand tax controllers ask most often when classifying job-work TDS between Section 393(1) codes 1023 and 1024.

Terra Insight Editorial Team Reconciliation Infrastructure

Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →

Published 6 July 2026

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TDS Reconciliation GST Input Credit Platform Settlements NACH Batch Matching Bank Reconciliation Form 26AS Matching ERP Integrations Enterprise Finance Ops

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Navin Krishnan

Managing Director & Founder — Terra Insight

Ex Amazon India · Intuit QuickBooks · Tata nexarc

ISO 27001:2022 Patent Pending Incorporated 2024