{"id":13868,"date":"2024-10-21T14:20:52","date_gmt":"2024-10-21T08:50:52","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=13868"},"modified":"2025-02-27T13:00:43","modified_gmt":"2025-02-27T07:30:43","slug":"contractor-payments","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/business-banking\/contractor-payments\/","title":{"rendered":"Contractor Payments in India &#8211; a Complete Guide"},"content":{"rendered":"<p><strong>Reviewed by &#8211; CA Sugandha Bhatia<\/strong><\/p>\n<p>Contractors or gig workers are people who take on short-term, project or assignment based jobs instead of a long-term, permanent employment.<\/p>\n<p>Businesses like Uber, Zomato and Dunzo employ thousands of gig workers. The benefits of working on a contractual basis are plenty &#8211; flexibility, additional income, full autonomy, etc.<\/p>\n<p>Since gig workers are not included in a business&#8217;s regular payroll, making payments to gig workers becomes complicated. Here&#8217;s a guide to managing contractor payments, with <span style=\"font-weight: 400;\">tips to ensure timely and secure transactions.\u00a0<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d7b14603742\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d7b14603742\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/contractor-payments\/#What-is-Contractor-Payment\" >What is Contractor Payment?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/contractor-payments\/#Terms-of-Payment-to-Contractors-in-India\" >Terms of Payment to Contractors in India\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/contractor-payments\/#TDS-on-Contractor-Payments\" >TDS on Contractor Payments\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/contractor-payments\/#Exceptions-to-TDS-on-Payment-to-Contractor\" >Exceptions to TDS on Payment to Contractor\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/contractor-payments\/#FAQs\" >FAQs<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-is-Contractor-Payment\"><\/span><b>What is Contractor Payment?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Contractor payment refers to the payment made by a company or individual to external vendors hired on contract to perform certain services. This could be for construction work, product repairs, transportation, broadcasting and telecasting contracts, catering, etc. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">The payment generally covers the contractors&#8217; costs, project expenses and a predetermined profit margin.\u00a0<\/span><span style=\"font-weight: 400;\">Timely payments as per contract keep them motivated while non-payment can lead to delays in work or even legal disputes.<\/span><\/p>\n<p>Calculating and making payments to contractors can get complicated and time consuming. With solutions like RazorpayX Business Banking+, businesses can automatically calculate and disburse vendor and contractor payments. Features like automated payouts, API payouts and bulk payouts are designed to make payments as seamless as possible.<\/p>\n<p style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/x.razorpay.com\/demo\/\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Demo RazorpayX Payouts for Free<\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Terms-of-Payment-to-Contractors-in-India\"><\/span><b>Terms of Payment to Contractors in India\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Most contracts specify payment terms which could be either:<\/span><\/p>\n<h3><b>Recurring payments<\/b><\/h3>\n<p>Payments can be made on a recurring basis, on a monthly, weekly or fortnightly basis.\u00a0<span style=\"font-weight: 400;\">These terms of payment are set for recurring jobs based on time spent or work completed as per the agreement.<\/span><\/p>\n<h3><b>Milestone-based<\/b><\/h3>\n<p>Some businesses choose to set a milestone-based reward system, where payment is made upon completion of a pre-specified milestone.<\/p>\n<h3><b>Retainer + Project<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">In this term of payment to contractors, the combination of a fixed monthly fee plus payment is done per assignment.<\/span><\/p>\n<h3><b>Lump sum Payment <\/b><\/h3>\n<p><span style=\"font-weight: 400;\">This approach covers the entire contracted value on satisfactory completion of the job.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, these are a few of the terms followed while making the payment to contractors in India. Advanced payment can also be made for mobilization costs but full and final settlement should be paid within 60 days of successful project closure or submission. Now that you are clear about the terms, let\u2019s discuss in detail the schedule of contractor payment in the next section.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"TDS-on-Contractor-Payments\"><\/span><b>TDS on Contractor Payments\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">As per Section 194C of the Income Tax Act, TDS must be deducted at source from payments made to contractors. The standard rate is 1% for individuals and 2% for those other than individuals, which is deducted and deposited to the government within the stipulated timeline:<\/span><\/p>\n<h3><b>Monthly payment<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">If the payment is done monthly, then make sure that it is cleared by the 7th of the following month.<\/span><\/p>\n<h3><b>Annual and final payment<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">If\u00a0 the <a href=\"https:\/\/razorpay.com\/learn\/what-is-payment-schedule\/\">payment schedule<\/a> agreed is once a year, then it is essential to get it done by 30th April of the next financial year<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Remember that a late fee is charged on delayed TDS deposits. E-filing returns ensures timely compliance and contractors can then claim TDS credit while filing their tax returns.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Exceptions-to-TDS-on-Payment-to-Contractor\"><\/span><b>Exceptions to TDS on Payment to Contractor\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">TDS is not applicable if the payment to a contractor is \u20b930,000 or less in a single payment, or \u20b91,00,000 or less in total during the financial year.<\/span><\/p>\n<p style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/x.razorpay.com\/auth\/signup\/?utm_source=blog&amp;utm_medium=cta&amp;utm_term=informational&amp;utm_content=contractor_payments\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Automatically Calculate TDS <\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\t\t\t<div id=\"rank-math-rich-snippet-wrapper\" class=\"\">\n\n\t\t\t\t\n\t\t\t<\/div>\n\t\t\n","protected":false},"excerpt":{"rendered":"<p>Reviewed by &#8211; CA Sugandha Bhatia Contractors or gig workers are people who take on short-term, project or assignment based jobs instead of a long-term, permanent employment. Businesses like Uber, Zomato and Dunzo employ thousands of gig workers. The benefits of working on a contractual basis are plenty &#8211; flexibility, additional income, full autonomy, etc.<\/p>\n","protected":false},"author":151156542,"featured_media":13874,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3437],"tags":[3581,3465],"class_list":{"0":"post-13868","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-banking","8":"tag-business-banking","9":"tag-contractor-payments"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/13868","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156542"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=13868"}],"version-history":[{"count":5,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/13868\/revisions"}],"predecessor-version":[{"id":16306,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/13868\/revisions\/16306"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/13874"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=13868"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=13868"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=13868"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}