Budget 2015-16 Clarification regarding deduction of tax Under section 194C of Income Tax Act, 1961 from payments to transporters

Under the existing provisions of section 194C of the Act payment to contractors is subject to tax deduction at source (TDS) at the rate of 1% in case the payee is an individual or Hindu undivided family and at the rate of 2% in case of other payees if such payment exceeds Rs. 30,000 or aggregate of such payment in a financial year exceeds Rs. 75,000. Prior to 1.10.2009, section 194C of the Act provided for exemption from TDS to an individual transporter who did not own more than two goods carriage at any time during the previous year. Subsequently, Finance (No.2) Act, 2009 substituted section 194C of the Act with effect from 1.10.2009, which inter alia provided for non- deduction of tax from payments made to the contractor during the course of plying, hiring and leasing goods carriage if the contractor furnishes his Permanent Account Number (PAN) to the payer.

The memorandum explaining the provisions of Finance (No.2) Bill, 2009 indicates that the intention was to exempt only small transport operators (as defined in section 44AE of the Act) from the purview of TDS on furnishing of Permanent Account Number (PAN). Thus, the intention was to reduce the compliance burden on the small transporters. However, the current language of sub-section (6) of section 194C of the Act does not convey the desired intention and as a result all transporters, irrespective of their size, are claiming exemption from TDS under the existing provisions of sub-section (6) of section 194C of the Act on furnishing of PAN.

As there is no rationale for exempting payment to all transporters, irrespective of their size, from the purview of TDS, it is proposed to amend the provisions of section 194C of the Act to expressly provide that the relaxation under sub-section (6) of section 194C of the Act from non-deduction of tax shall only be applicable to the payment in the nature of transport charges (whether paid by a person engaged in the business of transport or otherwise) made to an contractor who is engaged in the business of transport i.e. plying, hiring or leasing goods carriage and who is eligible to compute income as per the provisions of section 44AE of the Act (i.e a person who is not owning more than 10 goods carriage at any time during the previous year) and who has also furnished a declaration to this effect along with his PAN.

This amendment will take effect from 1st June, 2015.

NOTE ON RELEVANT CLAUSES  OF FINANCE BILL 2015

Clause 43 of the Bill seeks to amend section 194C of the Income-tax Act relating to payments to contractors.

Under the existing provisions contained in sub-section (6) of the aforesaid section, no deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum.

It is proposed to amend sub-section (6) of the said section so as to provide that no deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such contractor owns ten or less than ten goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number, to the person paying or crediting such sum.

This amendment will take effect from 1st June, 2015.

EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015

Amendment of section 194C.

43. In section 194C of the Income-tax Act, in sub-section (6), with effect from the 1st day of June, 2015, for the words “on furnishing of”, the words “where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with” shall be substituted.

( Compiled by Taxguru Team)

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Tags : Budget (1956) Budget 2015-16 (272) Section 194C (146) TDS (1024)

124 responses to “S.194C TDS On Payment To Transporter Owing More Than 10 Goods Carriage”

  1. M K VISHWAKARMA says:

    CAN WE DEDUCT TDS ON ADVANCE FREIGHT IN CASE OF BUILTY MADE TOPAY BASIS UNDER SECTION 194 C

  2. Munna Rawat says:

    My Question is I have not more then 10 Vehicle
    Then In TDS Exemption Certificate required Income Tax Department Signature or Stamp or Not
    It is Declaration is enough or not ?

  3. AJAY says:

    he has 1 tempo & have not pan number .will he deduct the tds if he dedcut tds howmuch percentage

  4. AJAY says:

    i have one tempo & i have no pan no. will i deduct the tds .

  5. swapnil says:

    how to calculate carriage thought PAN number online.pls provide link

  6. BIJU PG says:

    I HAVE ONE LORRY,HOW I PREPARE TDS DECLARATION AND WHICH NOTARY STAMP IS USING TO PREPARE TDS DECLARATION FORM UNDER S 194 C TDS

  7. Bince Alias says:

    Will this apply to hiring of JCBs?
    please help me on this

  8. VAIBHAV GUPTA says:

    If any Person having 10 Vehicles, In this case TDS deduction provision. Please suggest me.

  9. adarsha c n says:

    if transporation contranct, tds is filing u/s 194C(6)(7) is there any form for this purpose, or how we declare the non filing of tds of contranctor in earlier year? please answer me, is there any prescribed form, please suggest,

  10. surbhi says:

    Sir, is any firm require to pay TDS on Local Cartage, if its only based on textiles agency.

  11. b roy says:

    Please provide me no TDS Deducted of transporter 2(two) truck declaration form for the a.y 2014-15.

  12. Manyata says:

    i wanted to know if a person owning an auto & he is charging Rs.3000/- per month for transport of waste from one village to another, is there any tax deduction for that person. ( individual).

  13. Dhruvil Patel says:

    Yes

  14. Saddam Hussain says:

    If bill is For(less fright amount-30000) kya tbhi bhi builty pe tds katna padega???

  15. Himanshu singh says:

    if Transporter have 10 vehicle in starting year and he has submitted declaration and between year he has submitted that he has Purchase 1 vehicle now currently he has 11 vehicles
    now my question is this on which date we will deduct TDS from date of purchase new vehicle or starting from year

  16. JIGNESH SHAH says:

    1) When Transporter working on commission basis and hiring truck from outside on commission basis.How you will take this.

    2) TDS will not be deducted if Transporter is having less than 10 Trucks. But what if Transporter place the trucks which are hired by him – in that case TDS will be deducted or not. How the use will know, whether truck is owned / hired by the Transport Company.

  17. prabhat kumar singh says:

    sir
    my question to related tds
    tds is dedtucted to billing date or lorry loading date??????

  18. jitendra says:

    Sir my question is that i am paying 71000.00 transportation shell i deduct tds ?

  19. M. Ali says:

    Sir,
    I am the exporter i deal in garment manufacturing.
    There is a cargo firm which exports our goods by air/sea, in the financial year 2014-15 we deducted 0.25% TDS of the bill but I get the demand that i had to deduct till the bill amount 2250000 and after it i had to deduct 2%, is it correct in the financial year 2014-15, and please guide me also about F.Y. 2015-16

    Thanking you

    • Raj says:

      Which place are you exporting to and what type of garment? I guess that has got a role to play. Maybe I could enquire more if you mention the type of garment and the country it is being exported to.

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