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 Charges: Deduct 2% Under Section 194-I(a) for Business Use if Payments Exceed Rs. 120,000 Annually. A query was raised regarding the payment of hire charges for a vehicle rented from a spouse and the applicability of Tax Deducted at Source (TDS) on such payments. The response clarified that if the car is genuinely used for business or professional purposes, a reasonable hire charge should be paid, considering factors like usage, car condition, and associated expenses. TDS should be deducted under Section 194-I(a) at 2% from October 1, 2009, and previously at 10%, if annual payments exceed Rs. 120,000.