Section 194C: TDS on Transportation Charges

What is Section 194C?

Section 194C of the Income Tax Act, 1961, mandates the deduction of tax at source on payments made to resident contractors and subcontractors for executing any contractual work. This can include supply of labour, transportation, freight, courier, cartage, and job work. This section is crucial for businesses, professionals, and proprietorships that engage contractors for transportation, advertisement, AMC, and other services.

Applicability of TDS on Transportation Charges & Freight

TDS on transportation charges and TDS on freight charges is applicable if you pay a resident transporter or contractor for carriage of goods or passengers.
TDS applies to cartage charges, courier charges, hire charges, vehicle hire charges, and job work if the payment exceeds the specified limits.
TDS on transport charges is not applicable for personal use; it is only for business-related payments.

Section 194C TDS Rate & Threshold Limit (FY 2025-26)

Nature of Payee	TDS Rate (194C)	Single Payment Limit	Annual Aggregate Limit
Individual / HUF	1%	₹30,000	₹1,00,000
Partnership Firm / Company / Others	2%	₹30,000	₹1,00,000
No PAN / Invalid PAN	20%	-	-

194C TDS limit: No deduction if a single payment is ≤ ₹30,000 and total payments in a year are ≤ ₹1,00,000.
194C threshold limit: Aggregate of ₹1 Lakh per financial year.
TDS on job work limit: Same as above.
TDS on labour charges limit: Same as above.
TDS on contractor limit: Same as above.
TDS 94c limit / 94c threshold limit: Same as above.

Exemptions under Section 194C

Small Transport Operators: No TDS on transportation charges if the transporter owns ≤ 10 goods carriages during the year, provides a declaration, and quotes a valid PAN (Section 194C(6)).
Cash payment limit for transporter: Ensure compliance with cash payment rules; payments above ₹10,000 in cash may be disallowed as an expense.

TDS on Other Service Charges

TDS on service charges: Deduct TDS as per Section 194C or 194J, depending on the nature of the service.
TDS on professional fees limit for FY 2022-23: ₹30,000 per annum under Section 194J.
TDS on advertisement expenses limit: ₹30,000 per annum.
Advertisement TDS rate: 1% (individual/HUF), 2% (others) under Section 194C.
TDS on AMC charges: Deduct as per Section 194C.
TDS on travelling expenses: Deduct TDS if paid to a contractor for arranging travel as part of a contract.
TDS on courier services: Deduct under Section 194C if payment exceeds the limit.
TDS on installation charges: Deduct under Section 194C.
TDS on lease line charges: Generally under Section 194J unless part of a contract.
TDS on ocean freight: If paid to a resident, deduct under Section 194C.

HSN & SAC Codes for Transportation & Freight

Freight charges HSN code: 996511 (also applicable as 996511 SAC code, HSN 996511).
Freight outward HSN code: 996511.
Job work HSN code: 9988.
Freight and forwarding charges: Use appropriate HSN/SAC as per GST rules.

TDS Compliance & Return Filing

When to deduct TDS: At the time of credit or payment, whichever is earlier.
When to deposit TDS: By the 7th of the next month (for non-government deductors).
TDS return filing: File quarterly returns in Form 26Q.
Issue TDS certificates: Form 16A to be issued within 15 days of filing TDS return.

Penalties for Non-Compliance

Disallowance of expense: 30% of the expense disallowed under Section 40(a)(ia).
Interest on late deduction: 1% per month.
Interest on late deposit: 1.5% per month.
Late filing fee: ₹200 per day under Section 234E.
Penalty for non-filing: Up to ₹1 Lakh under Section 271H.