TDS Rate for Hire of vehicle
This query is : Resolved
18 July 2009
Please tell the TDS rate applicable for hire charges of vehicle
i) If the vehicle is provided with driver and monthly charges include his allowance
ii) If the agreement is only for providing the vehicle, driver charges are over & above the monthly rent
i) If the vehicle is provided with driver and monthly charges include his allowance
ii) If the agreement is only for providing the vehicle, driver charges are over & above the monthly rent
18 July 2009
1. TDS applicable on whole amount @ 10.3% u/s. 194I
2. TDS is payable on total amount even if the vehicle owner has seprated the charges in agreement as diesel exps, driver salary, maintenance exps, etc. The moot point is that you are paying the rent towards all these expenses hence TDS applicable on total rent. Also the driver is not employed by you and therefore he is not your employee.
2. TDS is payable on total amount even if the vehicle owner has seprated the charges in agreement as diesel exps, driver salary, maintenance exps, etc. The moot point is that you are paying the rent towards all these expenses hence TDS applicable on total rent. Also the driver is not employed by you and therefore he is not your employee.
18 July 2009
It is contract for providing the vechile on monthly basis.
Tds will be deducted u/s 194 C i.e 2% till 1st oct 2009 .
Onward 1st Oct 2009, if it individul or huf then 1% otherwise 2%
Tds will be deducted u/s 194 C i.e 2% till 1st oct 2009 .
Onward 1st Oct 2009, if it individul or huf then 1% otherwise 2%
Message likes :
1 times
18 July 2009
Agreed with ratan.
18 July 2009
Seems the view of Mr.Ratan and Mr.Rajesh is appropriate.
18 July 2009
Dear Mr. Ratan,
AS per expllanation III of Section 194 C , work shall also include :
a)
b)
c) Carriage of goods and passenger by any mode of transport other than by railways.
It means section 194C apply to hiring of vechile.
In section 194I, nowhere is provided regarding rent /hiring of vechile , there is only rent of land, building , machinery, plant, equipment, furniture & fittings .
Please give feedback on it.
AS per expllanation III of Section 194 C , work shall also include :
a)
b)
c) Carriage of goods and passenger by any mode of transport other than by railways.
It means section 194C apply to hiring of vechile.
In section 194I, nowhere is provided regarding rent /hiring of vechile , there is only rent of land, building , machinery, plant, equipment, furniture & fittings .
Please give feedback on it.
Message likes :
2 times
20 July 2009
Dear Mr. Bansal
Doesnt the definition of plant include vehicle?
Doesnt the definition of plant include vehicle?
28 July 2025
You’ve raised a very important and nuanced point on TDS applicability in the case of **vehicle hire charges**, especially distinguishing between **Section 194C** (payment to contractor) and **Section 194I** (payment of rent). Let's clarify it fully based on the law as it stood in **2009**, and also touch upon the "plant includes vehicle" argument.
---
## 🔍 **Relevant Legal Provisions in 2009**
### 🧾 **Section 194C** – TDS on contracts:
* Applies to contracts for **carrying out any work**.
* **Explanation (iii)** to Section 194C includes:
> "Carriage of goods and passengers by any mode of transport other than by railways"
Hence, **hiring of vehicles along with driver** for transport falls under **Section 194C**.
---
### 🧾 **Section 194I** – TDS on Rent:
* Applies to **rent paid** for:
> "use of land, building, plant, machinery, equipment, furniture or fittings"
* **Explanation (i)** defines **‘plant’** broadly.
Some argue that **vehicle = plant**, hence rent paid for it is taxable u/s **194I**.
But the key difference lies in the **nature of the arrangement**.
---
## 🧾 CBDT Clarification: Circular No. 558 and 715
### ✅ **CBDT Circular No. 715 dated 8 August 1995**, Q.21:
> **Q:** Whether TDS is to be deducted under section 194-I or 194C on **payment made for hiring of cars?**
**A:** If the car is hired **along with driver**, it is **a service contract** (not rent), hence **Section 194C applies**.
---
## ✅ **Summary Based on Agreement Type (in 2009)**:
| Scenario | Section | TDS Rate (as of 2009) |
| -------------------------------------------------- | -------------- | ----------------------------------------------------------------- |
| Vehicle hired **with driver**, monthly package | **194C** | **2%** (till 1 Oct 2009); then 1% (individual/HUF) or 2% (others) |
| Vehicle hired **without driver** (pure lease/rent) | **194I** | **10%** |
| Separate charges for driver, diesel, etc. | Still **194C** | Because it’s a composite contract for service |
---
## ⚖️ On Whether Vehicle = Plant?
Yes, judicially, **“plant”** includes **vehicles** (as held in various depreciation cases).
BUT — **Section 194I applies only when it's a pure rent agreement** (i.e., **vehicle is given without driver**, and the **right to use** is transferred).
---
### ✅ **Final View:**
* **If vehicle is provided with driver** → It’s a **service contract** → **Section 194C** applies
* **If vehicle is given on lease without driver** → It’s a **rent agreement** → **Section 194I** applies
* If there is any **doubt**, CBDT Circular 715 clarifies in favor of **Section 194C**
---
Would you like updated rates as per current law (FY 2024–25)?
---
## 🔍 **Relevant Legal Provisions in 2009**
### 🧾 **Section 194C** – TDS on contracts:
* Applies to contracts for **carrying out any work**.
* **Explanation (iii)** to Section 194C includes:
> "Carriage of goods and passengers by any mode of transport other than by railways"
Hence, **hiring of vehicles along with driver** for transport falls under **Section 194C**.
---
### 🧾 **Section 194I** – TDS on Rent:
* Applies to **rent paid** for:
> "use of land, building, plant, machinery, equipment, furniture or fittings"
* **Explanation (i)** defines **‘plant’** broadly.
Some argue that **vehicle = plant**, hence rent paid for it is taxable u/s **194I**.
But the key difference lies in the **nature of the arrangement**.
---
## 🧾 CBDT Clarification: Circular No. 558 and 715
### ✅ **CBDT Circular No. 715 dated 8 August 1995**, Q.21:
> **Q:** Whether TDS is to be deducted under section 194-I or 194C on **payment made for hiring of cars?**
**A:** If the car is hired **along with driver**, it is **a service contract** (not rent), hence **Section 194C applies**.
---
## ✅ **Summary Based on Agreement Type (in 2009)**:
| Scenario | Section | TDS Rate (as of 2009) |
| -------------------------------------------------- | -------------- | ----------------------------------------------------------------- |
| Vehicle hired **with driver**, monthly package | **194C** | **2%** (till 1 Oct 2009); then 1% (individual/HUF) or 2% (others) |
| Vehicle hired **without driver** (pure lease/rent) | **194I** | **10%** |
| Separate charges for driver, diesel, etc. | Still **194C** | Because it’s a composite contract for service |
---
## ⚖️ On Whether Vehicle = Plant?
Yes, judicially, **“plant”** includes **vehicles** (as held in various depreciation cases).
BUT — **Section 194I applies only when it's a pure rent agreement** (i.e., **vehicle is given without driver**, and the **right to use** is transferred).
---
### ✅ **Final View:**
* **If vehicle is provided with driver** → It’s a **service contract** → **Section 194C** applies
* **If vehicle is given on lease without driver** → It’s a **rent agreement** → **Section 194I** applies
* If there is any **doubt**, CBDT Circular 715 clarifies in favor of **Section 194C**
---
Would you like updated rates as per current law (FY 2024–25)?
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