Who is Eligible for TDS Exemption Under Section 194C(6)?
To claim exemption from TDS under Section 194C(6), transporters must meet these conditions:
- Own ten or fewer goods carriages at any point in the year prior to this year
- Being involved in the business of plying, hiring, or leasing goods carriages
- Provide written declaration to the payer along with PAN
- The declaration should also state the number of vehicles it owns
Key Points to Remember:
Ownership Matters: The exemption is only for the vehicles owned by the transporter and is not for hired/leased vehicles
Timing is of the essence: This is a limit of ten vehicles throughout the financial year
Necessary Immediate Notice: If the number of vehicles exceeds ten within the year, the transporter must give immediate notice to the payer in writing.
Mandatory PAN Number: The PAN Number in the declaration should be valid
Understanding the CBDT Clarification (Circular No. 19/2015)
The Central Board of Direct Taxes issued Circular No. 19/2015 dated November 27, 2015, clarifying critical aspects of Section 194C(6):
When Does the Exemption Apply?
The condition of owning not more than ten goods carriages must be fulfilled on the date when payment is credited or paid, whichever is earlier.
What If Vehicle Count Changes During the Year?
Scenario 1: A transporter owns 8 vehicles on April 1 and purchases 5 more vehicles on October 1 (total 13 vehicles).
- Result: No TDS on payments from April to September; TDS applicable from October onwards
Scenario 2: A transporter owns 12 vehicles on April 1 and sells 5 vehicles on July 1 (now 7 vehicles).
- Result: TDS applicable from April to June; no TDS from July onwards
Important CBDT Clarifications:
1.Hired Vehicles Not Covered-If a person receives payment for plying, hiring, or leasing goods carriages that are not owned by them, they cannot claim TDS exemption
2.Zero Vehicles: If the transporter has zero vehicles (in other words, they hire all vehicles from a third party), they have less than ten vehicles. But this does not satisfy the legal requirement
3.Date-Specific Compliance: The tax exemption is determined on a payment date basis, not on a yearly basis
Format of Declaration Under Section 194C(6) for Non-Deduction of TDS
Sample Declaration Format
To,
[Name of the Payer Company]
[Complete Address]
Subject: Declaration Under Section 194C(6) of the Income Tax Act, 1961 for Non-Deduction of TDS
Dear Sir/Madam,
I, [Name of Vehicle Owner], [Proprietor/Partner/Director] of M/s [Name of Transport Company/Firm], having its registered office at [Complete Address], hereby make the following declaration as required under sub-section (6) of Section 194C of the Income Tax Act, 1961 for receiving payments without deduction of tax at source (TDS):
Declaration:
- I am authorized to make this declaration in my capacity as [Proprietor/Partner/Director] of the transport business.
- The contractor/transporter is engaged by [Payer Company Name] for the purpose of plying/hiring/leasing of goods carriages for transportation services.
- I hereby declare that I/we do not own more than ten (10) goods carriages as on [Current Date].
- The current number of goods carriages owned by the contractor/transporter is [Number].
- I/We undertake that if the number of goods carriages owned by the contractor exceeds ten at any time during the previous year [Financial Year: 20XX-20XX], the contractor shall forthwith inform the payer in writing within 7 days of such change.
- The Permanent Account Number (PAN) of the contractor/transporter is: [PAN Number]
(A photocopy of the PAN card is attached herewith)
This declaration is valid for the financial year [20XX-20XX] unless circumstances change as mentioned in point 5 above.
List of Vehicles Owned:
S. No. | Vehicle Registration Number | Vehicle Type | Owner Name |
1. | [Registration No.] | [Truck/Tempo] | [Name] |
2. | [Registration No.] | [Truck/Tempo] | [Name] |
Verification
I, [Name of Declarant], the above-named declarant do hereby verify that the contents of this declaration from paragraphs 1 to 7 above are true and correct to the best of my knowledge and belief. No part of it is false and nothing material has been concealed therein.
Place: [City Name]
Date: [DD/MM/YYYY]
Signature of Declarant
Name: [Full Name]
Designation: [Proprietor/Partner/Director]
Enclosures:
- Copy of PAN Card
- List of vehicles owned with registration certificates (optional)
- Business registration documents (optional)
Important Documents to Attach with Declaration
While submitting the Section 194C(6) declaration, transporters should attach:
- Photocopy of PAN Card (Mandatory)
- Vehicle Registration Certificates (Recommended for verification)
- Business Registration Documents (GST Registration, Shop Act License, etc.)
- List of owned vehicles with registration numbers
When Should the Declaration Be Submitted?
The declaration under Section 194C(6) should be submitted:
- Before the first payment of the financial year
- At the beginning of each financial year (April) for continuing contracts
- Immediately when circumstances change (if vehicles exceed ten during the year)
- Whenever the payer requests updated information
Consequences of Non-Compliance
For Transporters:
- Cannot claim TDS exemption
- TDS will be deducted at applicable rates (1% or 2%)
- Loss of working capital due to TDS deduction
For Payers:
- If they fail to deduct TDS when required: Interest under Section 201(1A), penalty provisions apply
- If they accept false declarations without due diligence: Potential liability for non-deduction
TDS Rates When Declaration is Not Furnished
If the transporter does not provide a valid declaration under Section 194C(6), TDS must be deducted at:
- 1% for payments to individual/HUF transporters
- 2% for payments to other transporters (companies, firms, etc.)
- 20% if the transporter does not have a valid PAN (Section 206AA)
Practical Scenarios and Solutions
Scenario 1: Transporter Uses Hired Vehicles
Question: Can a transporter who doesn’t own any vehicle but hires from the market claim TDS exemption?
Answer: Technically, zero is less than ten, but CBDT clarification states that exemption applies only to payments for vehicles owned by the transporter. Payments for hired vehicles don’t qualify for exemption.
Scenario 2: Vehicle Ownership Changes Mid-Year
Question: What if a transporter sells vehicles and goes from 12 to 8 vehicles in September?
Answer: TDS applicable from April to August; no TDS from September onwards after fresh declaration submission.
Scenario 3: Partnership Firm with Multiple Partners
