What is Section 194C TDS in Freight Payments?
Section 194C of the Indian Income Tax Act mandates Tax Deducted at Source (TDS) on payments made to resident contractors and transporters. The deduction rate is 1% for payments made to individuals and HUFs, and 2% for corporate entities, applicable when a single contract payment exceeds ₹30,000 or aggregate annual payments exceed ₹1,00,000.
TDS Rates and Threshold Limits Under Section 194C
Any business, partnership, or enterprise paying commercial transport charges to a freight vendor must deduct income tax at source according to the statutory schedules:
- 1% TDS: Deducted when the transport payee is an Individual, Proprietorship, or HUF
- 2% TDS: Deducted when the transport payee is a Company, LLP, or Corporate Entity
- Threshold Limit: Single consignment payment > ₹30,000 or aggregate payments > ₹1,00,000 in a financial year
- Section 194C(6) Exemption: Zero TDS deduction if the transporter owns 10 or fewer goods carriages and furnishes a valid PAN along with declaration
Automated 194C Ledger and Form 16A Compliance with VRC
VRC Mobility automates Section 194C calculations for both enterprise shippers and fleet owners. Deductions are ledgered automatically on T+2 direct settlements, and quarterly Form 16A certificates are generated digitally for seamless income tax filing.
Frequently Asked Questions
When is TDS under Section 194C not deductible for transporters?
Under Section 194C(6), no TDS is deducted if the contractor is in the business of plying, hiring, or leasing goods carriages, owns 10 or fewer trucks at any time during the fiscal year, and furnishes a written declaration with a valid PAN.
Does Section 194C TDS apply on 18% GST component of freight?
No. As per CBDT Circular No. 23/2017, TDS under Section 194C is deducted only on the basic freight amount excluding the GST component indicated separately in the invoice.