TDS on transporters

Here, we will be discussing TDS on a transporter. i.e, the TDS applicable on payment made to the transporter.

Introduction to Section 194C

Section 194C of the Income Tax Act, 1961 states that any payment to a transporter is subject to a Tax Deduction at Source (TDS) at the rate of:

  • 1% in case if the payee is an Individual or a Hindu Undivided Family, and
  • 2% in case of other payees (i.e. partnership firm, company, trust, body of individuals or association of persons)

In case, if such payment exceeds Rs. 30,000 per contract or aggregate of such payments of contracts in a financial year exceeds Rs. 100,000.

TDS on transporter during the course of plying, hiring and leasing goods carriage

Earlier Provision

The earlier provision (up to May 31, 2015) provides that no deduction of tax is required from payments made to the transporter during the course of plying, hiring and leasing goods carriage if the transporter furnishes his PAN to the payer.

New Provision with effect from June 1, 2015

The new provision of Section 194C restricts the cases for non-deduction of tax. Non-deduction of tax will be available only for small transport operators owning not more than 10 goods carriages for the financial year.

Process identified

If the transporter is not owning more than 10 goods carriage at any time during the previous year, then deductor has to obtain a declaration from transporter along with the copy of a PAN before credit or payment to the transporter, whichever is earlier.

The transporter is liable for TDS if more than 10 goods carriage is owned at any time during the year. This deduction is done at the time of paying charges to goods transporter. TDS will be deducted at the rate of 1% or 2% as the case may be; based on the transport contractor’s status which can be identified by the 4th alphabet of the PAN.

Conclusion

With this addition to the Act, reporting all deductions w.r.t Nil TDS on transporter payment in quarterly return (26Q) is made compulsory.

The person responsible for making the payment to the transporters, which is subject to tax, is advised to collect the below documents for such transactions:

  • Self-attested copy of PAN Card
  • Declaration of the fact that such contractor is neither registered nor the owner of more than 10 goods carriages.

Click here for the Specimen of Declaration that should be given on the letterhead of the Transporter.

This ends our post about TDS on the transporter. If you have any queries or doubts kindly drop them in the comment section below.

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