Tds on transport contractor

The contractor's eligibility for TDS exemption hinges on the fact that he owns less than 10 vehicles. The operation of a larger number of vehicles through leasing does not affect the exemption criteria based on ownership. 

Thus, considering the contractor owns less than 10 vehicles and has provided a declaration for not deducting TDS, he would be eligible for the TDS exemption. 

Thanks a lot for your immediate responses sir... if you don't mind could please quote any legal evidence like Department clarification or any case laws sir.

TDS under Section 194C (Section 393 under IT Act 2025) applies to transport contractors at 1% for individuals and HUFs, 2% for others. However, there is a specific exemption.

If the transport contractor is engaged in the business of plying, hiring, or leasing goods carriages AND furnishes their PAN to you, no TDS is required. This exemption is in the proviso to Section 194C(6).

Practical compliance:
- Collect PAN from every transport contractor before payment
- Maintain a register of PAN declarations received
- If PAN is not furnished: TDS applies at 20% under Section 206AA (not the usual 194C rate)
- The PAN exemption does NOT apply if you are paying for passenger transport, car hire, or courier. It is specific to goods carriage.

For FY 2026-27, the single payment threshold for 194C is Rs. 30,000 and the aggregate threshold is Rs. 1,00,000. The PAN exemption overrides these thresholds when applicable.

This [TDS section comparison guide](https://taxgarden.in/blog/which-tds-section-applies-to-your-payment-194c-vs-194j-vs-194q-vs-194h) clarifies which TDS section applies to different types of payments.

For the section 194C(6) exemption, the contractor must own no more than 10 goods carriages at any time during the previous year and furnish the prescribed PAN declaration to the payer. The declaration alone is not enough if the ownership condition is not met.

Vehicles merely leased or hired by the contractor are not automatically counted as vehicles owned by him. So, operating around 50–60 vehicles does not by itself disqualify him; however, vehicles registered or otherwise owned by him must be considered, and the lease arrangements and ownership records should support the position. If the ownership condition is not satisfied, deduct TDS under section 194C at the applicable rate.

This assessment fits naturally into contractor onboarding and monthly payment checks. Manual verification of declarations, PANs and vehicle ownership across recurring transport bills is difficult; automation can reduce repetitive work while keeping the final tax judgment with your team. At Jir AI we provide 2,000+ AI agents and 650+ integrations to streamline your practice’s day-to-day workload. For a WhatsApp discussion on this workflow, message us here: https://wa.me/message/3HVOZ7HIY4ESC1