Most of the time I observed that in the industry there are always be a confusion regarding application of Section 194C i.e. TDS on contract at the time of payment to the transporter. This is might be because of various amendments has been taken place since last so many year related to this specific point i.e 194C(6) and 194C(7). Hence today I will try to summarise the details of only these two smalls but very important sub-sections of Section 194C.
Article also contains Format of Declaration to be obtained on the letter head of the Transport Contractor in case of non-deduction of tax at source u/s 194C (6) of the Income Tax Act, 1961
“194C – Payments to contractors
(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.
(7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed.”
1. This amended sub-section is applicable w.e.f. 01st April, 2015
2. The transporter for these sub-sections means person handling business of plying, hiring or leasing goods carriages.
3. The benefit of non-deduction of tax will be available only for small transport operators owning not more than 10 goods carriages.
Hence if the transporter owning not more than 10 goods carriages at any time during the year, provide his PAN alongwith the declaration then as a payer, you don’t have to deduct his TDS u/s 194C.
But if the transporter owning more than 10 goods carriages at any time during the year, then you, as payers are liable to deduct TDS at the time of paying charges to goods transporter at the rate of 1% or 2% as the case may be; based on the transport contractor’s status.
Note: The above mentioned rate i.e. 1% and 2% will be reduced to 0.75% and 1.50% respectively during the period starting from 14th May, 2020 to 31st March, 2021.
4. The person responsible for paying or crediting any sum to the such transporter shall furnish declaration along with PAN to the income-tax authority.
The link for the format of declaration is as under:
7. The tax deduction will be required to be done at the time of credit of the amount payable to the account of the contractor (or to any other account) or at the time of payment, whichever is earlier.
(Republished with Amendments by Team Taxguru)