The threshold limit for tax deduction at source is ` 2.5 Lakh. For the purpose of
computation of threshold limit, contract value needs to be considered and not the invoice value or payment amount. However, for the purpose of ascertaining the threshold limit, the value of supply shall be considered as the amount excluding taxes.
(ICAI FAQ PUBLICATIONS 06-09-2017 TAX PAYMENT, INTEREST, PENALTY AND OTHER AMOUNTS: FAQ NO. 42)