40A(3) CASH PAYMENTS AND TDS 94C

This query is : Resolved

rajesh (Querist)
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08 October 2009 DEAR SIR/MADAM

AN ASSESSE PAID LORRY FRIGHT CHARGES CASH PAYMENT Rs. 33,000/- THIS IS ALLOWABLE OR DISALLOWABLE
AND
FROM 1-10-2009 NEW TDS PROVISIONS FRIGHT CHARGES PAID ABOVE 20000 SINGLE PAYMENT AND AGGREGATE 50000 PER YEAR TDS DEDUCTABLE U/S 194C BEFORE 1-10-2009 BUT NEW TDS PROVISONS LORRY DRIVER IS SUBMIT HIS PAN CARD AT THE TIME OF FRIGHT CHARGES PAID ASSESSE IS EXEMPT OF TDS DEDUCT ON HIRE CHARGES OR HE IS LIABLE FOR DEDUCT

PLEASE TELL

THANKS IN ADVANCE

Rajeev

Rajeev (Expert)
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09 October 2009 does the circular say that lorry driver has to submit his pan card ? i am not sure , i think the bill of the transport company should have a pan card .

I think the provisons of No pan submission (deduction @ 20% )would be effective from 1.4.2010.

cash payment above 20000/- (40A(3) read with rule 6DD) is attracted .

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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14 July 2024 Let's address your queries regarding lorry freight charges and TDS provisions:

### 1. Lorry Freight Charges of Rs. 33,000/- (Paid in Cash):

- **Allowability:** Payment of lorry freight charges in cash is generally disallowable for income tax purposes under Section 40A(3) of the Income Tax Act, unless certain exceptions specified under Rule 6DD apply. These exceptions include situations where payment is made under circumstances where banking channels are not available, among others.

- **Rule 6DD:** If the payment meets the conditions specified under Rule 6DD, such as urgency of payment or lack of banking facilities, the expenditure may be considered allowable. However, you need to satisfy the specific conditions laid down in the rule.

### 2. TDS Provisions for Lorry Freight Charges:

- **Before 1st October 2009:**
- Before this date, TDS under Section 194C was applicable on payments made for lorry freight charges exceeding Rs. 20,000 per single payment or Rs. 50,000 aggregate in a financial year. The deductor (payer) was required to deduct TDS at the prescribed rates.

- **From 1st October 2009:**
- From this date, new provisions under Section 194C were introduced where lorry owners or transporters are required to furnish their PAN (Permanent Account Number) to the deductor (payer). If PAN is not provided, TDS is deductible at a higher rate of 20%.

- **Circulars and PAN Submission:**
- As per Circular No. 715 dated 8th August 1995, transporters are required to quote their PAN to the deductor (payer) for TDS purposes. If PAN is not furnished, TDS is to be deducted at a higher rate.
- The requirement for PAN submission by the transporter ensures proper compliance with TDS provisions and facilitates verification of tax credits.

### Conclusion:

- **Lorry Freight Charges Paid in Cash:** Disallowance under Section 40A(3) unless exceptions under Rule 6DD are satisfied.
- **TDS Provisions (Post 1st October 2009):** Deductor (payer) must deduct TDS under Section 194C at the applicable rates. If PAN is not provided by the transporter, TDS is deductible at a higher rate.

It's crucial to comply with these provisions to avoid disallowance of expenses and penalties for non-deduction or lower deduction of TDS. For specific applicability in your case and to ensure compliance, consulting with a tax advisor or Chartered Accountant would be advisable.

If you have further questions or need clarification on any specific aspect, feel free to ask!

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