TDS Applicability on Courier Charges – Sec 194C

When you are sending a courier, usually the amount is significantly less. However, there can be a case wherein you are getting into a contract to send multiple couriers in a month. You may also encounter a situation when you are sending a big consignment via courier, and the payment exceeds a certain amount. In these cases, you are required to make a TDS deduction before you pay the courier company.  The complete details of the law are covered under Section 194 C of the Income Tax Act 1961. This section also defines the TDS on the contracts. Courier is also a type of contract that you are undertaking. We understand that reading the whole Act can be complicated so, we have simplified things for you, and we have listed them here in this article.

TDS on Courier Charges

How much TDS should be deducted on Courier Charges?

You need to deduct the TDS when you are paying the courier charges and below are the slabs defined.

  • If you are paying to an individual of a HUF, then the deduction had to be 1% until 14 May 2020. The government reduced this to 0.75% because to give a push to the economy.
  • If the payment is made to any other entity who is not an Indian Citizen or HUF, then the deductions used to be 2% which have been reduced to 1.5%
  • You do not have to deduct the Higher Education Cess or Surcharge while deducting the TDS.
  • The entity must provide you with their PAN Card. You need to deduct 20% of the total amount as TDS if the PAN Card details are not provided to you. 

How can I calculate the TDS on Courier Charges?

We have already shared the rate of deductions above. If you are still not sure about the calculations, then let us help you a little more. The TDS on the courier charges is deducted to the invoice value. You must not consider GST in the calculation. If the amount of GST is not mentioned in the invoice, then you can go ahead and deduct the TDS on the full invoice value.

Are there any exemptions on TDS deductions on Courier Charges?

Yes, there are some of the exceptions defined in the Act. We will wrap up those exemptions in the points listed below.

  • There is a threshold of the payment, and if the invoice amount doesn’t exceed that amount, then you should not deduct any TDS. If you are making a one-time payment, then this threshold is of Rs 30,000. If you are getting into a contract that requires a recurring payment, then you only need to make TDS deductions if the amount of the payment is over Rs 1, 00,000 annually.
  • You must also not deduct any TDS when you are making payments to the individual or HUF for any personal purpose or personal expense.
  • It should be noted that any payment to the non-resident Indian doesn’t attract TDS under section 194C. Instead, it has defined guidelines under Section 195 of the Income Tax Act.

When do I need to deposit the TDS after making the deductions?

The Act also defines the time frame when you need to make the deductions and when you need to deposit the TDS deducted. Talking about the deductions, you need to deduct the TDS before crediting the sum to the account of the payee. This point is applicable only if you are paying via the digital method. If you are making a payment via cash, cheque or draft, then you need to deduct the TDS before issuing these instruments.

Depositing the TDS is also easy. If you are making payment on behalf of the government, then you need to deposit the TDS immediately. If you are not a government entity, then you can deposit the TDS on Courier Charges within seven days of the deduction.

What about the TDS Deduction Certificate?

You need to provide the TDS Deduction certificate to the contractor who is undertaking the contract for the courier. If you are not able to provide the certificate, then the contractor can even download the certificate from the government website. You can even provide him with the acknowledgement number and other details which would make it easy for him to download the TDS Deduction certificate.

Can a contractor claim refund of TDS on courier charges?

Yes, if the income of the contractor is less than the taxable income or if the tax amount payable is less than the tax amount received. In such cases, the refund can be claimed under the income tax refund law. The contractor would need Form 16 to initiate the refund, and it can only be done after the end of the financial year. The adjustment in the income tax can be made based on the advanced tax deposited by various individuals.

The Best Approach 

Taxation can be complicated, and you might come across various challenges while taking up such tasks. The best approach for anyone is to hire a tax lawyer who is aware of such acts and procedures. These entities will calculate the TDS amount for you, and they will also help you in paying the deductions to the government. There are many offline tax lawyers and online services available in India who can offer you their services at an affordable price.