Section 194M TDS deduction by certain individual or HUF on certain expenses

Section 194M related to deduction of TDS on Payment of certain sums by certain individual or Hindu undivided family was introduced by the Finance Act 2019.

As per Section 194M any person being an individual or HUF making payment to any resident for carrying out any work  in pursuance of contract, by way of commission (excluding insurance commission) or brokerage or fees for professional services shall at the time of credit or payment (in any mode) whichever is earlier shall deduct 5% of such sum as income tax.

No deduction shall be made if the amount of service provided in aggregate is less than 50 lakhs rupees

If TDS is required to be deducted as per the provisions of section 194C, 194H or 194J then Section 194M would not be applicable

The person responsible for deducting TDS as per the provisions of Section 194M is not required to obtain TAN number.

As per Rule 30 the sum deducted as per the provision of this section shall be paid to the credit of Central Government within 30 days from the end of the month in which deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QD.

Explanations

“Contract” shall include sub contract

“Work” shall include:

• advertising;
• broadcasting and telecasting including production of programmes for such broadcasting or telecasting;
• carriage of goods or passengers by any mode of transport other than by railways;
• catering;
• manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.

“Commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities

 “Professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section

Illustration

Mr A, a businessman is covered under tax audit as per the provisions of section 44AB has appointed Mr B for carrying out the works contract and the consideration agreed is Rs 55 Lakhs. Now Mr A is required to deduct TDS @1% (because the payment is being made to an Individual) as per the provisions of  section 194C and section 194M will not be applicable and the same is to be paid to the credit of Central Government till the seventh of next month in which payment is made or credited whichever is earlier.

Had Mr A would not  have been covered under tax audit, the transaction would have been governed by the provisions of section 194M and TDS would be deducted @ 5% and the same is to be paid to the credit of Central Government within 30 days from the end of the month in which deduction is made.