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S.194C TDS On Payment To Transporter Owing More Than 10 Goods Carriage

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)

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)

Categories: Income Tax

View Comments (132)

  • 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??

  • How is mandatory tan number of transport company.
    I Have a business of transport service how will TDS deduct for vendor ?

  • 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

  • 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

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