TDS on Hiring of Taxi

19 June 2007
Dear Sir,

I am a working in accounting team of a consultancy Company. I am facing a problem while deducting TDS on hired Taxi, I am confused whether i should deduct TDS on Contractor u/s 194 C or TDS on Rent u/s 194 I.

Please answer my query & tell me what should I do while deducting TDS on Hired Taxi Services, please explain with the authority of law in supporting to your answer so that I will be able to convince the other members of my Organisation.

Nishant Kumar
Mob. 098688-12448

Shashi Mohan Jha (Expert)
20 June 2007
194I defines "Rent" as any payment for the use of any land or any building. It cannot be applied on taxi hiring. Its a contract attracting 194 C.


20 June 2007
As per sec.194I rent payment does not include taxis. it attracts sec 194C only

Abhisek Konar (Expert)
21 June 2007
before the amendment to sec. 194 I by Finance Act 2006, car hire was covered under sec. 194 C, being contract. But now due to the amendment to sec. 194 I(further amended by Finance Act 2007) where TDS of 10 % is prescribed for hiring of plant & machinery, car hire will be covered u/s 194 I

Abhisek Konar (Expert)
21 June 2007
now the debatable issue is that wether we can consider hired cars to fall within the definition of plant and machinery.
i feel that as cars used in commercial purposes falls under block 7 within the definition of block of assets and that block represents plant and machinery hired cars will fall under 194I

Shyam Lal Naik (Expert)
16 July 2007
The arrangement has to be examined from the contract between the parties. Whether it is a service contract or cabs taken on monthly rental basis.

If the running & maintenance is borne by the taxi owner than it will be a service contract and will fall under 194C.

Another possible test will be to find whether the taxi owner is charging service tax. If so, it will be a case of service contract attracting 194C.

194I is applicable only in cases plant etc. is taken on monthly fixed rental basis. Consideration in such cases is not linked to output but linked to time.

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