Section 194C – TDS on Transporter

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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 (HUF), and
2% in case of other payees (i.e. partnership firm, company, trust, body of individuals or association of persons)

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

Previously, payment to transporters carrying on the business of plying, hiring, or, leasing of goods carriages was not liable to withholding tax if the transporter furnishes her/his permanent account number (PAN) to the payer.

It seems that the intention of having this provision was to exclude small transporters from the rigors of TDS provisions. But because of the way the section was drafted transporters were excluded from the TDS provisions if they had a PAN.

With a view to bring back the big transporters back into the TDS fold, from 1st June 2015 onward, Department made an exemption. This exemption would be available only to those transporters who own ten or less goods carriages at any time during the previous year. Such a transporter would also need to furnish a declaration to that effect to the payer along with the PAN.

There was also some bit of confusion in the minds of a few people as to whether the said section (and exclusion) applied to payers engaged in the business of transport or to payees engaged in the business of transport. To remove this confusion, it has now been clarified in the Memorandum to the Finance Bill that this exemption is available whether such amount is paid by a person engaged in the business of transport or otherwise.

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

Following are the documents which a Deductor is supposed to collect for such transactions:
– Self-attested copy of PAN Card
– Declaration of neither the contractor is registered nor is he the owner of more than 10 goods carriages.

Steps for requesting Form 16

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