Tds on transport contractor

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kamatchi sundaram

accounts

122 Points Posted on 12 August 2025

Sir..

I have a doubt regarding deduction of TDS feom transport contractor.

We have engaged a transport contractor who had less than 10 vehicles and providing declaration in his letter head for not deducting tds.

However he leasing and Operating around 50 vehicles in a month for providing uninterrupted services to us.

In this case whether he is eligible for tds exemption, he own less than 10 vehicles but he operat around 60 vehicles in a month.

Replies (3)

Quick Summary

This discussion clarifies the rules around Tax Deducted at Source (TDS) for transport contractors. The key point is that TDS exemption under Section 194C(6) is based on the contractor owning fewer than 10 vehicles, regardless of how many they lease or operate. To claim this exemption, the contractor must provide their PAN and a declaration. If a PAN is not provided, TDS applies at a higher rate of 20%.

Rama chary Rachakonda

Master in Accounts & high court Advocate

9620 Points Posted on 12 August 2025

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.

kamatchi sundaram

accounts

122 Points Posted on 12 August 2025

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.

Tax Garden

Tax Consultant

1645 Points Posted on 11 June 2026

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.