Section 194M TDS – Certain Payments Individual/HUF

♦ Introduction:

Section 194M was introduced for the purpose to cover some specific high value transactions in personal nature under TDS which was previously excluded from TDS.

♦ Scope and meaning of section 194M:

1. Any person being an individual or HUF [other than those who are required to deduct income-tax as per the provisions of Section 194C, 194H or 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 contract, by way of commission or brokerage (not covered in 194D) or by way of professional services during the financial year.

2. Such individuals & HUF must not be required to get their books of accounts audited.

3. It applies when the total amount paid o a resident individual /HUF carrying out any contractual work or providing any professional services in F.Y. exceeds Rs 50 lakh.{TDS to be deducted @5%}.

4. 194M does not apply to those individual /HUF whose books are required to be audited.

5. The individual or HUF who has not to deduct tax can pay the tax to govt. by quoting his PAN only. TAN is not required.

6. Payments to NR are not covered under this section 194M.

♦ Who are liable to deduct tax:

1. If any payment by Individual/HUF to resident by way of commission or brokerage or to a resident contractor or a resident professional carrying out any work in nature of personal purpose exceeds Rs 50 lakh will have to deduct tx @5% under section 194M.

2. Those individual/HUF are not required to get their books audited.

3. This section 194M was applicable from 1^st September, 2019. Hence, TDS amount will be deducted on any payment made after this date even if contract existed before, provided payment exceeds Rs 50 lakh.

4. Please note insurance commission does not gets covered under section 194M.

5. TDS u/s 194M is deducted at the time of credit of amount or at the the time of payment whichever is earlier.

♦ Effect of non-furnishing of PAN:-

1. Every person whose receipts are subject to deduction of tax at source (i.e. the deductee) shall furnish the PAN to the deductor.

2. If such person does not furnish the PAN to the deductor, the deductor will deduct tax at source at higher rate of the following:-

• The rate prescribed in the Act
• At the rate in force

or

• At the rate of 20%

♦ Deposit of tax to the credit of central govt.:-

1. Any sum deducted u/s 194M shall be paid to the credit of CG within period of 30 days from the end of the month in which deduction is made & shall be accompanied by challan-cum-statement in Form No. 26QD.

♦ Some important points related to SECTION 194M:

1. This section is not applicable to Non-Residents.

2. Lower TDS certificate can be submitted under this section.

3. This section is applicable from 1^st September, 2019.

♦ For Example:-

Q. If contract entered on the 10^th August, 2019 but payment was made on 3^rd September, 2019 of Rs 52 lakh.

A. In the above case, TDS will be deducted on Rs 52 lakh @5%.