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TDS on Tractor hire on monthly basis

08 March 2025

Hi,

We are a company and we have hired a tractor on monthly basis for Rs.33000 p.m. Please advise if we need to deduct TDS u/s 94I or 94C

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3 Replies

Rama chary Rachakonda (Master in Accounts & high court Advocate email ID:ramachary64@gmail.com voice no:9989324294) (7366 Points)
Replied 08 March 2025

As a company, you're required to deduct Tax Deducted at Source (TDS) on certain payments, including rent and hire charges.

Applicable TDS Provisions:

1. *Section 194C*: TDS on payments to contractors, including hire charges for equipment like tractors.

2. *Section 194-I*: TDS on rent payments, which may also apply to hire charges. Determining Applicable Section:

1. *Hire Charges*: Since you've hired a tractor on a monthly basis, the payment is considered hire charges, which falls under Section 194C.

2. *Threshold Limit*: For Section 194C, TDS is deductible if the payment exceeds Rs. 1 lakh in a financial year.

TDS Rate: 1. *Section 194C*: The TDS rate is 1% of the payment (2% for non-resident payees).

Conclusion: You should deduct TDS under Section 194C, as the payment is for hire charges. Ensure you obtain the contractor's PAN and comply with TDS regulations.

Recommendations: 1. *Verify Contractor's PAN*: Obtain the contractor's PAN to avoid higher TDS rates.

2. *Maintain Records*: Keep accurate records of payments, TDS deductions, and challan deposits.

3. *File TDS Returns*: Timely file TDS returns (Form 26Q) and provide the contractor with the TDS certificate (Form 16A).

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CA Rakesh (CA) (68 Points)
Replied 10 March 2025

Your company is renting a tractor for ₹33,000 each month, and you need to figure out how to handle the tax deduction for this payment.

Here are the key points to consider:

Is the tractor rented with a driver?
Yes: If the tractor comes with a driver, it's treated as a service. This means you'll need to follow specific tax rules for service contracts.
No: If you're just renting the tractor itself without a driver, this is categorized as equipment rental.

Tax Deduction Rates:
If it’s just rental (without a driver):
This falls under a tax category where you have to deduct 10% of the payment as tax, but only if the total rent exceeds ₹2,40,000 for the year.

If it's with a driver:
In this case, the tax deduction will be either 1% if you’re paying an individual or 2% if you’re paying a company or firm. You need to deduct this if you pay ₹30,000 in one go or more than ₹1,00,000 over the whole year.

Your Situation:
Since you are paying ₹33,000 a month, that totals ₹3,96,000 for the year, which is above the threshold in both scenarios. Therefore, tax deductions are necessary.

Final
- If the tractor comes with a driver: Deduct 2% if it's a company or 1% if it’s an individual.
- If it’s without a driver: Deduct 10%.

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