Hire charges towards vehicle rent to spouse - Tds applicability

[SANJAY MACHE]

Whether I can pay hire-charges towards vehicle rent to my spouse, who has car in her name? Whether TDS needs to be deucted towards such payment? If yes at what percent?

[DEV KUMAR KOTHARI]

If you really use the car owned by your wife for your business or profession then naturally you must pay a reasonable hire charge to your wife. Reasonableness of hire will depend on extent of use for business or profession, condition of car, hire charges chargeable by others on similar terms and conditins as to time of deployment, use, repair, fuel, driver, insurance and other expenes to be born by you or the owner etc. TDS, will be u/s 194-I (a) @ 2% w.e.f. 01.10.09 and before that @ 10% if the payment of hire charges in any year exceed Rs.120 K.

AI Summary

TDS on vehicle hire to spouse requires deduction at prescribed rates when payments are for genuine business use. Payments characterized as vehicle hire to a spouse are subject to tax deduction at source. The applicable TDS rate changed with effect from 01.10.2009; prior to that change a higher withholding rate applied where aggregate annual hire payments exceeded the statutory threshold. The payer must deduct TDS at the prescribed rate applicable to hire of movable property when making such payments to a spouse.