TDS on payment made to Transporters

Introduction to Section 194C

 

As per Section 194C of the Income Tax Act, 1961 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 HUF, and

 

2% in case of other payees

 

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 transporters for plying, hiring and leasing goods carriage

 

Old Provision (till May 31, 2015)

The earlier provision provides that no TDS be deducted from payments made to the transporters if the transporter furnishes his PAN to the payer.

 

New Provision with effect from June 1, 2015

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

 

Process identified

If the transporter is doesn’t own > 10 goods carriage at any time during the financial 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  > 10 goods carriage is owned at any time during the year. The TDS has to be deduction at the time of paying charges to goods transporter. TDS will be deducted at the rate of 1% or 2% as per the status of Transporter.

 

Conclusion

With this amendment 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, must collect following 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.