Freight Payment in Cash exceeding limit of Rs. 20,000

Dear Sir,

In this case there two options

1.  Apply the P.A.N. of the said truck driver.
2. Make him payment in two names of firms

 Freight paid in cash exceeding Rs.20000 to a person who don't  have an a/c is not an exception u/s 194C and hence even that should be entertained u/s 194C

 Freight paid in cash exceeding Rs.20000 to a person who don't  have an a/c is not an exception u/s 194C and hence even that should be entertained u/s 194C

Dear sir,

we could think on the following lines:

1) the truck driver does not have any establishment for carrying on business or any bank account to put his saving into. whether his  profit after meeting all his expenses will exceed themaximum income not  taxable?It is quite unlikely, in which case,TDS need not be done.

2) To be on a safer side, TDS can be deducted after pursuading him to obtain PAN. It is likely that he must have ignored obtaining PAN earlier. But, with the changing Face of Tax administrative procedurs, he should be educated about obtaining PAN.

3) what will be the implication of Sec 40 A (3) on  the above expenditure?

TDS has to be deducted, check the transporter name mentioned on the builty, you are making the payment to a person whose name is mentioned on the freight invoice/builty, driver is just a collecting the money on his behalf, so tds has to be deducted.

I am looking for a very practical suggestion. Above views are of general nature.

pass entries for Rs 20000 on various days because as per Finance Act 2008 any cash payment revenue in nature if exceeds Rs 20000 to any party during a day(even at different timings) will be disallowed.So better to pass entries on different days with Rs 20000.Recently our client faced the same problem.

you will have to diduct TDS as per 194 C (if it falls under that catagery)still you can file the return as return is accepted up to 85 % of pan and you have made payments above 20000 that would be dis allowed

Hi Kumar,

I dont think that truck driver, being a owner of the vehicle, will be able to file return or calculate his income....

Let us think at our side for any solution:-

Making payment through cash will create problems later...... Cash is paid for Single consignment which is above Rs.20,000/-

No. of consignments for that Truck Driver can be maintained separately (in Excel Sheet). Cash can be paid in such a way that it is less than Rs.20,000/- per day.  At the end of each month or so, we can reconcile the no. of payments made (less than Rs.20,000/-) and no. of consignments made by the Truck Driver.

From the Income Tax point of view, Freight is paid on that day itself for a consignment. But for us, it is maintained in excel sheet. 

Remember, this is not accrual method.  This is just to keep payment less than Rs.20,000/-.  It should also noted that amount paid (which is less than Rs.20,000/-) should be reasonable from the business point of view.  If the frieght payment is 25,000/- (market rate)...then Cash Payment can be made for less than Rs.20,000/-.  But if the freight (as per the nature of transaction, goods & travel) every time is around Rs.50,000/-, then paying an amount less than 20K would be awkward.

  I suggest this assuming, he is regular Truck driver and there is transaction often without full and final settlement...

At his Side, if possible we can convince him:-

1. Bank Account is very important as it records our income and cash flow.  Loans are disbursed based on the strengths of Bank Account.

2. Since he is doing self business, filing return would be very vital incase he looks for any personal or home loan.

2. Since he is doing self business, filing returning would be very vital incase he looks for any Personal or Home loan.

3. PAN would be required everywhere hereafter. (opening bank account, Buying properties, etc.,)

4. Being in Self business and without Bank Account or PAN would be equal to not doing anything.  There is no way he can prove anywhere his income.

5. By calculating his yearly income (from your organisation and other incomes,if any) you can educate him that there will not be much income tax liability.

Hope this helps u

Regards,

gurusanthanam

At his Side, if possible we can convince him:-

1. Bank Account is very important as it records our income and cash flow. Loans are disbured based on the strengths of Bank Account.

2. Since he is doing self business, filing of returns would be very vital incase he looks for any Personal or Home Loan.

3. PAN would be required everywhere hereafter (opening bank account, buying properties etc.,)

4. Being in Self business and without Bank account or PAN would be equal to doing nothing.  There is no way he can prove anywhere his income.

5. By calculating his yearly income (from your organisation and other incomes, if any) you can educate him that here will not be much income tax liability.

Hope it is helpful

Regards,

gurusanthanam

Sorry, there is some HTML problem hence msgs are splitted up...

2. Since he is doing self business, filing of returns would be very vital incase he looks for any personal or home loans.

3. PAN would be required everywhere hereafter (buying property, etc..)

4. Being in self business and not having bank account or PAN is equal to being in nothing.  No way he can prove his income to the outside world.

5. By calculating his yearly income (from ur organisation and others) you can educate him that there will not be much of tax liability.

Regards,

gurusanthanam

Thank you for the suggestions and views.

The time limit to settle the transporter his freight payment is only 2-3 hours from the time he reports for delivery till the unloading is complete.

During that time the transporter/driver of the truck lines up for return load. Immediately after unloading he has to rush for loading the material fo next destination.

How is it possible to brief him on the Tax Rules and Regulations? He is concerned with his freight payment.

The above are the facts and in such circumstances how to deal with the situation?

Following steps may help you to solve this practical problem....

1. As the Driver don't have PAN, TDS certificate is of no use for him claiming Refund or deduction

2. Either Convince any familiar Transporter for such transactions for providing LRs Documens or Make understand driver and convince him to use name of any Transporter he is familiar with.

3. Deduct TDS on freight,  Posting in accounts should be made in the name of LR holder,Issue TDS certificate in the concern Firm name.

4.Pay cash less than 20,000/- to Driver ( If more than 20,000/- then splits it to  different dates)

dear mr. kumar,

ref: 134 CTR 132, 219 ITR 486.

in the case of Calcutta Goods Transport Asso. V/s. Union of India, Hon'ble High court of Calcutta has verdicted that

mere transportation of goods by a common carrier does not affect the goods carried nor are the goods affected thereby and as such cannot be brought within the scope of section 194C of IT Act.

common carriers of goods by road are not liable to deduction of tax at source under section 194C of the IT Act, 1961 and the provisions of the section are not applicable to them.

hope the above will give you some clarity.