TDS on Extended Warranty purchased from Vehicle Dealer

[Dhara Sheth]

Will TDS be applicable on Extended warranty being charged by a vehicle Dealer ?

Fact: The Vehicle dealer has made an official Tie-up with an Insurance Company wherein they say that the amount collected from us will be paid to Insurance Company. The warranty cover costs of spares and Labour charges involved.

Please support with any circulars/Notification/Case-laws if any.

[Ramesh Kothari]

I opinioned that it is applicable due to existing warranty expired and it will treated new in name of extended period

AI Summary

TDS on extended vehicle warranty: separate post expiry warranty payments can trigger withholding obligations. Whether TDS applies when a vehicle dealer collects payment for an extended warranty covering spares and labour and forwards the amount to an insurance company. The advisory view set out is that TDS is applicable because, after expiry of the original warranty, the separate payment for the extended period is to be treated as a new warranty contract, giving rise to a withholding obligation.