Whether tds is applicable or not?

TDS u/s 194I (plant & machinery) at 2% if payment exceeds 180,000 pa.

TDS u/s 194I (plant & machinery) at 2% if payment exceeds 180,000 pa.

Yes Mr. Mihir is right.

Dear All,

Please Note TDS will not be applicable as per 194I.

194I  (P&M) - CAR is not a plant or machinery.

So, need not deduct TDS under any circumstances

When you hire a car and the driver takes you to places, it is only a contract with the driver or with travel agency and 194C is applicable.

Yes sec 194C will be  applicable in this case as rightly said by Mr.Antony.

194C will be applicable 

Yes TDS would be applicable u/s 194C

As per sec. 194I, the defination of rent include the amount paid for use of plant and machinery. the def of P&M includes Motor car. So like for Eg. one car hired by the company for its director so TDS will be deducted under this section once the amount crosses the limit of Rs. 1.80 lacs @ 2%.

Sec 194C includes the carriage of passenger as work and hence TDS will be deducted @ 2% when it crosses the limit as laid down by this section.

So we have to analyse each and every situation and them we have to decide.

Reply to the Query.

1. If the charges are paid to car hire agency, it will fall u/s 194C.

2. If the amounts are paid to other then car hire agency for specific car then 194I will apply.

The TDS shall be deducted u/s 194-I.

as the expenses shall be treated as "Car - Hire Charges"

As you are hiring the Car not the services of the Driver.

However, the payment should be more than Rs.1,80,000/- annually (i.e. more than 15,000/- pm).

Kindly read the following wordings of the two sections 194I & 194C ::

194I :: Any person, (not being an individual or a HUF), who is responsible for paying to (a resident) any income by way of rent, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or cheque (whichever is earlier) shall deduct income tax there on at the rate of:-

a. 2% for the use of any machinery or plant or equipment.

Whereas :-

194C :: (1) Any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and a specified person shall at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash (whichever is earlier).

Furthur, by The Taxation(Amendment) Act, 2006 ;wef 13th July, 2006 the scope of the definition of Rent was enlarged to include "Machinery, Plant & Equipments"

 “rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,—

        (a) land; or

        (b) building (including factory building); or

        (c) land appurtenant to a building (including factory building); 

        (d) machinery; or

        (e) plant; or

         (f) equipment; or

        (g) furniture; or

        (h) fittings,

           whether or not any or all of the above are owned by the payee

Mr. Anirban Dev

You have to distinguish between (1) Hire charges paid to a car driver or travel agency and (2) renting a car as such. In the first case, it is a contract only and 194C is applicable. The hire charges charged by the driver includes rent of the vehicle, wages of the driver, cost of petrol etc. The driver or the travel agency gives you a service.

 In the second case you are renting a car as such. You can use the car for any purpose, you have to employ a driver and bear the cost of petrol and other expenses. In the end you return the vehicle. Here 194I is applicable. 

Mr. KT Antony

I agree with you.

the query was ::

Please let me know if a car is hired from a particular destnation to visit no. of places, many tims in a year. Then whether TDS is applicable? & If yes then U/s 194C or 194I?

In that case as we both know 194I shall be applicable. (Correct me if wrong)