TDS on Ocean Freight

Applicability of TDS Provisions for Ocean Freight basically depends upon Status of Transporter, weather Resident or Non Resident.

As in case of Resident, Provisions of Section 194C of the Income tax Act, 1961 will apply as it covers carriage of goods or passengers by ANY mode of transport other than by railways, hence it includes Ocean Freight.

In case of Non Resident, There is specific provision u/s 172 of the I T Act to assess “shipping business of non-residents”. However, there may be cases that income of foreign ship may not be taxable in India on account of Double Taxation Avoidance Agreement with the country of origin of the ship. Section 172 is not related to TDS , the issue becomes simple if the TDS on freight payment to non resident shipping companies has to be made. The answer comes from following Board circular no 723 dated 19/9/1995 which clarifies that TDS should not be made in case of non resident shipping companies as they are being assessed u/s 172.

Conclusion:

  • In case of Indian transporter – TDS u/s 194C
  • In case of NR transporter – NO TDS

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