tds on hiring of bus
prithwish sengupta
(Querist) 24 September 2010
This query is : Resolved
a school has hired a bus for carrying its school children. all cost of the bus (fuel,driver etc) are borned by the owner of the bus.hiring charges cross rs 120000 p.a. whether tds to be deducted u/s 194I or 194C??
please provide case law if any.
thanking you.
A V Vishal
(Expert) 24 September 2010
It is worthwhile to mention that the basic TDS rate for rent under Section 194-I is 10 per cent whereas for payment to a contractor under Section 194C is 2 per cent.
DECIDING FACTORS
TERM OF THE CONTRACT:For deciding whether the payment of hire charges by the employer to the agency attracts deduction of tax under Section 194-I or Section 194C, the terms of the contract between the parties need to be examined.
LEASING AGREEMENT:If the agreement is for leasing of the car per se, the payment would attract tax deduction under Section 194-I.
TRANSPORTATION OF PASSENGER:If the agreement is for a service of transportation to be provided by the agency, the payment would attract tax deduction under Section 194C (the definition of the term ‘work’ includes inter alia carriage of goods and passengers by any mode of transport). like if there is agreement to provide transportation to employees from home to office and back attracts 194-C.
CONTROL MATTERS:Another important factor to be considered is whether the car is under the control of the company or the agency.In the former case, the payment would generally constitute rent, whereas in the latter, the payment would be for carriage of passengers.
JOB ASSIGNED :if there is specific job has been assigned to transporter than 194C will apply and otherwise section 194-I.
Guidance on the appropriate rate to be applied can also be taken from Circular No. 558 dated March 28, 1990, issued by the Central Board of Direct Taxes, which deals with deduction of tax at source from payments by a State Transport Corporation to private bus owners.Some of the relevant criteria indicated in the Circular are provision of a driver, keeping the bus (in our case, the car) road worthy, payment based on usage, etc., which indicate that the contract was a service contract and the provisions of Section 194C are applicable.
chauffeur-driven car is hired for one day, Section 194C would be attracted as the payment is essentially for carriage of passengers.
if a car is leased for, say, a year and is under the control of the company and it is the company’s responsibility to run and maintain it, the payment would be in the nature of rent and Section 194-I would be applicable.
A V Vishal
(Expert) 24 September 2010
New rates of TDS for Contracts u/s.194C :
One Percent (1%) where payment for a contract are to individuals/HUF.
Two Percent (2%) where payment for a contract are to any other entity.
prithwish sengupta
(Querist) 25 September 2010
thanks for your opinion. but it is written that no matter by what ever name called in case of hiring 194I willbe applicable. further as per cir no 715 dt 8/8/95, it is written that even if man power is providedin case of composit rent,it will be u/s 194I and not u/s 194C. please clarify.
thanking you.
