Section 194c(6) of the Income Tax Act of 1961 explains the TDS (Tax Deducted at Source) on payments made to transport contractors. According to this section, any person or organization making a payment to a transport contractor is required to deduct TDS at the rate of 1% of the total amount paid or credited to the contractor.

This provision was introduced in the Finance Act of 2015 to bring the transport sector under TDS compliance. Before this, transport contractors were not required to deduct TDS on their payments. However, with this amendment, transport contractors are now liable to pay taxes on their income under the provisions of Section 194c(6).

The section applies to all types of transport contractors, including truck operators, logistics companies, and any other person or organization engaged in the business of transport. It is essential to note that the TDS provision is not applicable to payments made to a transport contractor for the purpose of purchasing goods from them; it only applies to payments made for hiring or renting vehicles.

Additionally, the TDS payment must be made by the person or organization making the payment to the transport contractor. The amount must then be deposited with the government within the stipulated time frame. Failure to deposit the TDS within the deadline attracts penalties and interest.

It is also important to note that transport contractors who provide their PAN details to the person or organization making the payment are eligible for a lower TDS rate of 0.75%. This provision was introduced in 2019 to encourage the use of PAN by transport contractors and to reduce the tax burden on small transport operators.

In conclusion, Section 194c(6) of the Income Tax Act of 1961 mandates the deduction of TDS on payments made to transport contractors. This provision applies to all types of transport contractors and only applies to payments made for hiring or renting vehicles. To comply with the TDS regulations, the person or organization making the payment must deposit the TDS amount with the government within the prescribed time frame. Transport contractors who provide their PAN details can benefit from a lower TDS rate, making compliance with this provision a win-win situation for both the contractor and the person or organization making the payment.