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As we all that, before Finance Act, 2015, 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. 1,00,000. 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 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.

Therefore to achieve the desired intention, Finance Act, 2015 make an amendment in 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 is effective from 1st June, 2015.

Extract of Section 194C(6) are as under:

194C – Payments to contractors.

194C(6) – 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 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.

 (Compiled by Taxguru Team)

Republished with Amendments

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154 Comments

  1. Alish Timbadiya says:

    If Transporter send the truck which is not in their own name for transportation of good and get the transportation charge for over come the limit of 10 truck for TDS , Then , Can we deduct the TDS on truck which is not own by them .

  2. naresh says:

    Transporter bill 47500/- but some reason i am deducted amt 17500/- and pay 30000/- only so my query is TDS deducted or not ,no any other transaction this party,

  3. Srinivas says:

    Good information about tds on transportation but road transport corporation is doing the business of transportation with less than 10 buses what will be deduction rate to be implemented

  4. KPSINGH says:

    IN CASE OF TRANSPORT HAVE NOT MORE THAN 10 OWN VEHICLE BUT SINGLE BILL VALUE IS MORE THAN 50000, IN THIS CASE TDS DEDUCTED OR NOT

  5. Krishi Ajbani says:

    Can the transporter furnish declaration of more than one year at once? Is it valid? It is mentioned in the declaration for the year FY 2020-2025, TDS should not be deducted. Is this kind of declaration valid? Or different declarations are to be presented for each year?

  6. Kishore says:

    CONTRACTOR IS A BROKER AND SUPPLY THE VEHICLES TO US I.E., HE IS NOT THE OWNER OF THE VEHICLE HE SUPPLIED THE VEHICLE OF OTHER OWNERS. wE HAVE MADE THE PAYMENT TO OUR BROKER. iN THIS CASE LIABILITY OF TDS WILL ARISE IF BROKER GIVE US THE PAN AND

  7. MOHAN KANODIA says:

    SIR MY QUESTION IS IF WE SENT CONSIGNMENT EX MILL (FREIGHT PAID BY PARTY ) BUT FREIGHT PAID BY US A\C OF PARTY AFTER DELIVERY BY VEHICLE, TDS DEDUCTION LIABILITY WITCH PERSON

  8. Akshay Varma says:

    Is it compulsory that the transporter should have owned above 10 vehicles to deduct the tds if 1 payment exceeds Rs. 35000 & total payment in a FY exceeds Rs. 300000 Limit?? Plzz answer if anybody knows.

  9. B R MEHTA says:

    Transporter Owing Less Than 10 Goods Carriage
    not need to deduct tds
    my question is : should be taken value of bill taken in tds return with zero tds

  10. YATENDRA JAIN says:

    CONTRACTOR IS A BROKER AND SUPPLY THE VEHICLES TO US I.E., HE IS NOT THE OWNER OF THE VEHICLE HE SUPPLIED THE VEHICLE OF OTHER OWNERS. wE HAVE MADE THE PAYMENT TO OUR BROKER. iN THIS CASE LIABILITY OF TDS WILL ARISE IF BROKER GIVE US THE PAN AND DECLARATION

  11. Narinder Singh says:

    If transporter is charged on road insurance charges than TDS applicable on Total amount or principle amount. Like we have received Rupees. 39600 (30000 basic amount + 1200 service Charges +3000 insurance of goods + 5400 GST = 39600 than TDS applicable on amounting 31200 or 34200??

  12. 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 ?

  13. 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

  14. 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,

  15. 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).

  16. 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

  17. 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.

  18. 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

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