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A business pays freight and courier bills to many transporters and is unsure which need TDS and which can be paid in full.
Treat all carriage as contract work; skip deduction only for transporters with ten or fewer goods carriages who give PAN and a written declaration.
Vendor master flag for declaration received, declaration date and PAN, renewed each year, with the declaration scan attached.
Correct TDS on non-qualifying transporters and a reportable list of declaration-based payments for the quarterly return.
Yes, usually. Freight and courier payments count as payments to a contractor, so TDS (tax deducted at source) applies once a single bill or the yearly total crosses the limit. There is one useful relief: a transporter who owns ten or fewer goods carriages and gives you their PAN with a written declaration can be paid in full, provided you keep the declaration on file.
How does TDS work on freight?
Carriage of goods is “work” under Section 194C of the Income-tax Act 1961. From 1 April 2026 the same rule sits in Section 393 of the Income-tax Act 2025. The basics:
- Rate: 1% if the transporter is an individual or HUF, 2% for a firm or company.
- Limits: deduct when a single bill is above ₹30,000, or when total payments to that transporter in the year go above ₹1,00,000.
- Relief: Section 194C(6) of the 1961 Act exempts a transporter who owns ten or fewer goods carriages at any time in the year and gives a declaration with PAN.
Which transporters need TDS?
| Payee type | Usual TDS treatment | Paper you need |
|---|---|---|
| Single-truck owner-operator | No TDS if declaration given | PAN plus signed declaration |
| Small fleet, ten or fewer trucks | No TDS if declaration given | PAN plus signed declaration |
| Transport company, more than ten trucks | TDS at 2% | Invoice, PAN |
| Courier company | TDS at 2% (company) | Invoice, PAN |
| Freight aggregator or broker app | Depends on who bills you; often 2% | Invoice; check the billing entity |
What must the declaration say and how long is it valid?
The declaration should state the transporter’s name, PAN, and that they owned ten or fewer goods carriages at any time during the year. It should be signed and dated. Take a fresh one each year, because fleet size can change. Store the scan against the vendor record in Tally or Zoho Books, so anyone paying the bill sees it.
Without a valid PAN, the relief does not apply. Under Section 206AA of the 1961 Act, missing PAN means TDS at a higher rate, usually 20%.
Worked example: ₹6,00,000 freight in a quarter
A spice exporter paid ₹6,00,000 freight in the quarter ending 30 June 2026.
| Payee | Freight paid | Declaration? | TDS |
|---|---|---|---|
| Four owner-operators | ₹4,00,000 | Yes, with PAN | ₹0 |
| One transport company | ₹2,00,000 | Not eligible | ₹4,000 |
| Total | ₹6,00,000 | ₹4,000 |
TDS on the company: ₹2,00,000 × 2% = ₹4,000. The company is paid ₹1,96,000. The four owner-operators get their full ₹4,00,000, but all four payments still go into the quarterly return with their PANs. If one of them had missed giving a declaration and was an individual, TDS would be 1%. On a ₹1,00,000 bill that is ₹1,000.
Do courier bills and freight forwarding follow the same rule?
Courier bills are also contract payments, so deduct at 2% once the limits are crossed. The ten-carriage relief rarely helps because most courier companies are large. Freight forwarders need a closer look. If the forwarder’s bill separates ocean or air freight paid to a carrier from its own service charge, ask your CA how each line is treated, because practice varies. Customs duty paid through the forwarder is not part of the TDS base.
What to read next
- The full rules for contractors are in TDS on contractor payments under Section 194C.
- See a worked sector example in freight TDS in the textile trade.
- For a map of every everyday TDS payment, read which business payments need TDS.
TransactIG reconciles your TDS deductions and returns against your books and bank, so a freight bill paid without deduction or declaration lands in an exception queue.