Tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 November 2011 Dear All,
Company "A" is a transport company, as a business nature co. incurs huge amount say 10-12 Lacs on repairs & Maintenance of trucks, which are paid in cash.for that co. receive "KACCHA BILL", where no Ser.Tax is charged by vendor.
So it may be possible co. make payment of more than 75,000 during to same vendor for repairing.
QUE. is whether co. is require to deduct TDS.

I thing that TDS is not applicable as co. doesn't have contract/understanding with any vendor
Pls suggest your view as per provision of IT Act.

Thanks:
AMIT

Querist : Anonymous

Querist : Anonymous (Querist)

03 December 2011 Pls.help in the matter.

Thanks:

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 Hi Amit,
This is an important and practical query — especially for transport companies dealing with truck repairs and cash payments. Let's go point by point based on your situation.

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## ✅ **Situation Summary:**

* **Company A**: Transport company
* **Nature of expense**: Repairs & maintenance of trucks
* **Amount**: ₹10–12 lakhs annually (some vendors getting more than ₹75,000/year)
* **Mode of payment**: **Cash**
* **Invoices**: Informal "Kachcha bills" without service tax
* **Query**: Whether **TDS is applicable** in the absence of a formal contract or agreement.

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## ✅ **Relevant TDS Provision: Section 194C – Payment to Contractors**

Section 194C of the Income Tax Act states:

> Any person responsible for paying any sum to a **resident contractor** for carrying out any **work** (including supply of labor for carrying out any work) in pursuance of a **contract** (written or implied) **shall deduct TDS**.

### 🔍 Key points:

* **"Work"** includes **repairs and maintenance**.
* A **formal written contract is not required** — even **oral or implied contracts** are sufficient to trigger TDS.
* **Thresholds for TDS under 194C**:

* Single payment > ₹30,000
* Aggregate payments in a year > ₹75,000

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## ✅ **Answer to Your Question:**

Yes, **TDS is applicable** under **Section 194C**, **even if**:

* There is **no written contract**,
* The payment is made in **cash**, and
* The vendor issues **kachcha bills**.

> 🔴 Once the **payment to a vendor exceeds ₹75,000 in a financial year**, the company **must deduct TDS** (2% if vendor is other than individual/HUF, 1% if individual/HUF).

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## ✅ Additional Issues to Note:

### 🔹 1. **Cash Payment & Disallowance under Section 40A(3)**

> If **cash payment > ₹10,000** (per day, per vendor), the **entire amount can be disallowed** as an expense under Section 40A(3), unless covered under **Rule 6DD exemptions**.

So even if TDS is deducted, the **expense may not be allowed** in computation of taxable income if paid in cash.

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### 🔹 2. **Informal “Kachcha” Bills**

* Such bills often don’t mention PAN or GST.
* Deducting TDS becomes harder, but **still mandatory**.
* You should **insist on PAN**, or else deduct at **20% under Section 206AA**.

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## ✅ Suggested Action:

* Identify vendors where payments **exceed ₹75,000/year or ₹30,000 per invoice**.
* Deduct TDS under **Section 194C**.
* Avoid cash payments > ₹10,000/day to comply with Section 40A(3).
* Ask vendors for PAN; otherwise deduct TDS @ 20%.

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## 📝 Summary Table

| Criteria | TDS Applicability |
| ------------------------ | ----------------------------------------------------- |
| No written contract | ✅ Yes (oral contract is enough) |
| Payment > ₹75,000/year | ✅ Yes (Section 194C) |
| Payment in cash | ✅ Yes (but disallowed under Sec. 40A(3) if > ₹10,000) |
| Kachcha bill with no PAN | ✅ TDS @ 20% (Sec. 206AA) |
| Vendor is individual/HUF | TDS @ 1% |
| Vendor is company/firm | TDS @ 2% |

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Let me know if you’d like help drafting a compliance memo or vendor communication note.

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