A New section, 194M has been introduced vide finance act, 2019 with regard to Payment of certain sums by certain individuals or Hindu undivided family, which reads as follows:
Any person, being an individual or a Hindu undivided family (other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H or section 194J) responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract, by way of commission (not being insurance commission referred to in section 194D) or brokerage or by way of fees for professional services during the financial year, shall, at the time of credit of such sum or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 5% of such sum as income-tax thereon.
Provided that no such deduction under this section shall be made if such sum or, as the case may be, aggregate of such sums, credited or paid to a resident during a financial year does not exceed 50 Lakhs.
The said section is effective from 01st Sep 2019.
It is clear from the above that, Sec 194M is applicable to an individual/HUF who is not liable to deduct TDS under section 194C/194H/194J. The liability to deduct TDS under section 194C/194H/194J arises only when the Individual/HUF is subjected to Tax Audit in the previous financial year i.e. if the Individual is liable to Tax audit in the previous financial year, then liability to deduct TDS is as per the provisions of section 194C/194H/194J for the current financial year. If not, TDS is to be deducted u/s 194M in the current financial year for the above specified payments.
TDS amount will be deducted on any payment made after 01st September 2019, even if the contract is existing before 01st September 2019, provided the payment for the financial year exceeds Rs. 50,00,000/. Tax shall be deducted at the time of payment or at the time of credit of the amount, whichever is earlier. Tax is to be deducted only if the aggregate sum exceeds Rs. 50 lakhs to one recipient (payments falling within the provisions of section 194C/194J/194H or together) in a financial year.
For the purposes of this section, Deductor need not obtain a TAN. The payment can be made using PAN through Form No. 26QD – Challan–cum–statement of deduction of tax under section 194M.
Tax so deducted u/s 194M shall be paid through Form no.26QD within a period of 30 days from the end of the month in which the deduction is made. Every person responsible for deduction of tax under section 194M shall furnish the certificate of deduction of tax at source in Form No.16D to the payee within 15 days from the due date of furnishing the challan-cum-statement in Form No.26QD.
Disclaimer: This is as per the understanding of the Author.