Section 194M of the Income-tax Act mandates individuals or Hindu undivided families (not liable under other specified sections) to deduct 5% TDS on payments to residents for work, commission, brokerage, or professional services. An amendment in the Finance Bill 2024 proposes reducing this TDS rate to 2%, effective from October 1, 2024. This applies when the sum is credited or paid by any means.
Budget 2024: Section 194M – Payment of certain sums by certain individuals or Hindu undivided family
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.
2. It is proposed that TDS under section 194M of the Act be reduced from 5% to 2%.
3. The amendment will take effect from 1st day of October 2024.
[Clause 60]
Extract of Clause 60 of Finance Bill 2024
Clause 60 of the Bill seeks to amend section 194M of the Income-tax Act relating to payment of certain sums by certain individuals or Hindu undivided family.
Sub-section (1) of the said section provides that 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 five per cent. of such sum as income-tax thereon.
It is proposed to amend the said sub-section so as to reduce the said rate of tax deduction from five per cent. to two per cent.
This amendment will take effect from 1st October, 2024.
Amendment of section 194M.
In section 194M of the Income-tax Act, in sub-section (1), for the words “five per cent.”, the words “two per cent.” shall be substituted with effect from the 1st day of October, 2024.
