Many people, as well as companies, are often confused about the TDS charges on various services they avail. Service that is common across most of the companies is transportation. It can be the transportation of goods or even people. We have received a lot of queries to clarify the guidelines as per the Income Tax Act. In this article, we have listed all the information about the TDS on Transportation Charges so, go ahead and check out the details now.
TDS on Transportation Charges
It should be noted that the TDS deductions apply to the transportation of goods as well as people. There are provisions in Section 194 C of the Income Tax Act of 1961 that clarifies all the deductions and the conditions. We have listed all the information in points below.
How much TDS should be deducted on Transportation Charges?
Multiple factors govern the rate of deduction of TDS for the transportation charges. We have listed them below.
- The TDS stands at 1% if you are dealing with an Individual or HUF. However, in the light of pandemic, the government has reduced the amount to 0.75% until 31 March 2021.
- The TDS stands at 2% if you are dealing with a Partnership Firm or Non-Resident. However, in the light of pandemic, the government has reduced the amount to 1.5% until 31 March 2021.
What happens if I do not have a PAN Number?
If you are getting into a contract with the transporter, then the transporter should provide you with their PAN Details. You would need to furnish these details to the Income Tax Authority while making the TDS payment. If in case, you do not receive the PAN Details, you need to deduct 20% of the invoice amount as the TDS irrespective of the status of the entity.
How can I calculate the TDS on Transportation Charges?
Any TDS is calculated on the pre-tax amount. What this means for you is that you should not calculate the TDS on the GST Amount. You would need to deduct the TDS on the invoice amount minus the GST. If in case, the invoice doesn’t give you segregation of the GST, you can go ahead and deduct the TDS on the total invoice amount.
Are there any exemptions on TDS deductions on Transportation Charges?
Yes, there are certain cases when the TDS deductions should not be made. You can go through these points below.
- If the transporter owns less than ten trucks, then you should not make any TDS deduction. While making a contract, the transporter should provide you with a written attestation about the number of trucks owned by him.
- If you are opting for one-time services and if the invoice amount is less than Rs 30,000, then you should not make any TDS deductions.
- If you are opting for recurring services, then you need to check the amount of annual payment. If the anticipated annual payments are less than Rs 1 Lakh, then the TDS deductions should not be made.
When do I need to deposit the TDS after making the deductions?
All the deductions are to be made at the time of credit of the invoice to the transporter. It also translates to the fact that the deductions should be made at the time of payment. If you are paying by cash, then you can go ahead and deduct the TDS at the time of payment. However, if you are issuing a check or a draft, then you need to issue the instrument of the invoice amount minus the TDS applicable. It should also be noted that you would need to deposit the TDS within the seven days of the deduction.
Can a transporter claim refund of TDS on Transportation Charges?
In case, the transporter’s tax liabilities are less than the tax paid in a particular financial year; he can go ahead and file an income tax return. This income tax return will help the transporter in claiming the refund on the excess TDS paid on his behalf. It should be noted that the claims can only be made at the end of the financial year once the Form 16 is available for the user. Until then, the transporter will have to wait.
The Best Approach
If you are hiring a transporter or if you are a transporter, the best approach is to hire a tax lawyer or a CA firm. They will be able to do all the taxation tasks for you, and they will also be able to deposit the TDS on your behalf. This approach will also reduce the chances of error in the approach, and hence you will be able to get an error-free transaction completed. In case of any doubt, these professionals will also be able to help you in clarifying the doubt. You can also reach out to us if you have any questions about the TDS on transportation charges.