7/10/24, 3:25 PM TDS on Transportation Charges: TDS Rate, Limit, Applicability, Section

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HOME INCOME TAX TDS TDS ON TRANSPORTATIO…

TDS on Transportation Charges: TDS Rate, Limit,

Applicability, Section (FY 2023-24)
By Mohammed S Chokhawala

Updated on: May 24th, 2024 | 3 min read

Tax Deducted at Source (TDS) is one of the most vital mechanisms in India's taxation system for collecting

tax at the source of income. From the many that fall under the TDS applicability, transportation charges

have stipulated rules and rates that businesses must abide by. This article explains TDS on transportation

charges. It consists of the TDS rate on transportation charges, TDS on transportation charges limit,

applicability, and relevant sections under the Income Tax Act.

Understanding TDS on Transportation Charges

TDS on transportation charges is a tax that is supposed to be deducted by the payer at the time of

payment to a transport contractor. Such deduction will come under TDS on payment to a contractor or

subcontractor under Section 194C of the Income-tax Act,1961, and help accumulate like advance tax and

thereby reduce the chances of tax evasion.

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7/10/24, 3:25 PM TDS on Transportation Charges: TDS Rate, Limit, Applicability, Section

Applicability of TDS on Transport Charges

Section 194C governs the TDS applicable to transportation charges. This section mandates TDS on

payments to contractors, including transport contractors, for carrying out any work, including the labour

supply. However, certain conditions and limits apply.

Who is Liable to Deduct TDS?

Any individual or entity responsible for paying transportation charges to a transport contractor must

deduct TDS. This includes individuals, HUFs (Hindu Undivided Families), firms, companies, and other

entities if their turnover exceeds the prescribed limit under the Income Tax Act.

Exemption Limit

TDS is only required if the payment is exceeding a certain threshold. The TDS on transportation

charges limit is Rs. 30,000 for a single payment and Rs. 1,00,000 in aggregate during a financial

year.

TDS Rate on Transportation Charges

The TDS rate on transportation charges under Section 194C is generally 1% for payments to individual or

HUF contractors and 2% for other entities. However, there is a specific provision for transport operators

owning ten or fewer goods carriages.

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Special Provisions for Transport Operators

Transport operators who own ten or fewer goods carriages at any time during the previous year can

furnish a declaration along with their PAN to avail exemption from TDS under Section 194C(6). This

provision aims to simplify compliance for small transport operators.

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7/10/24, 3:25 PM TDS on Transportation Charges: TDS Rate, Limit, Applicability, Section

Calculation and Deduction of TDS

We will learn to calculate and deduct transport charges, TDS rate, and limit with the help of the following

example:

Consider a company named XYZ Pvt. Ltd., which hires ABC Transport Services to transport some goods.

The transportation cost is Rs. 50,000. Follow these steps to calculate the TDS:

1. Find the applicability: The payment is Rs. 30,000 for one transaction.

2. Know your rate: ABC Transport Services's TDS rate will be 1% for individuals/HUF or 2% for
companies.

3. Deduct TDS

For an individual or HUF: 1% of Rs. 50,000 = Rs. 500

For a company or other entity: 2% of Rs.50,000 = Rs.1,000

4. Deduction and remittance of TDS: XYZ Pvt. Ltd. shall deduct Rs. 500 or Rs. 1000 as TDS and remit
the net amount to ABC Transport Services.

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