In the Finance Act, 2022 the Ministry of Finance inserted TDS on payment to resident contractors and professionals through Section 194M. It’s applicable from 1st September, 2019. Section 194M contains provisions relating to TDS on payments made by individuals or HUF in pursuance of a contract or by way of commission or brokerage or by way of fees for professional services during the Financial Year.
Before introducing section 194M many individuals or HUF (Hindu undivided family) receive income from their Client but they were not paying any tax on such income. Definitely there was Tax evasion. That’s why government introduced section 194M.
TDS shall be deducted only when such sum, or aggregate of such sums, exceeds 50,00,000 in the financial year.
Nature of payment under 194M:-
Nature of payment divided into three parts Contract, commission or brokerage and professional service:-
1. ‘Contract’ meaning specified in the section of 194C of Income tax.
2. ‘Commission or brokerage’ specified in the section of 194H income tax.
3. ‘Professional services’ specified in the section of 194J of income tax.
4. ‘Work’ this is also explained in the section 194C.
Who is liable to deduct TDS u/s 194M?
An individuals or HUF other than those who required to deduct tax under section 194C, 194H, and 194J responsible to paying TDS under Section 194M.
What is the rate of Tds deduction under section 194M?
- TDS shall be deducted at the rate 5% from the sum payable to a resident payee/deductee under section 194M of income tax.
- If payee not want to give available PAN, so TDS shall be deducted at the rate 20%.
Form 26QD is the challan-cum-statement for reporting the transactions liable to TDS on payments to resident contractors and professionals under section 194M. The form 26QD is used to furnish information in regards to TDS on property.
The person who liable to deduct tax shall furnish details in form of 26QD from the end of the month in which tax has been deducted. Tds amount will have to be paid to the government.
|
TDS to be deducted by/Payer |
Any individual or HUF |
| To be deducted on/payee | Any resident in India |
| Type of Payment | Payment for contract work (194C) or Commission or brokerage (194H) or Professional service (194J). |
| TDS rate | @5% |
| No TDS to be deducted if | value does not exceed Rs. 50,00,000 in a financial year |
| TDS paid Through to the Government | Form 26QD |
The author can be however contacted for further clarification at 9654182791 or via mail at caajay92@gmail.com
DISCLAIMER:- This Blog is for the purposes of information / knowledge and shall not be treated as solicitation in any manner or of for any other purposes whatsoever.
Author Bio
