Key TDS Connections: Sections 194C, 194H, 194J, and 194M

A very important relation of Tax Deducted at Source (TDS) under Sections 194C, 194H, and 194J with TDS under Section 194M

Tax Deducted at Source (TDS) plays a pivotal role in the financial landscape, and Sections 194C, 194H, 194J, and 194M are integral parts of this framework. This article delves into the specifics of each section and unravels their crucial connection.

TDS under Section 194C: Payment to Creditors

THRESHOLD LIMIT FOR DEDUCTION Single cum credit or paid more than Rs 30000 (or) The aggregate of sums credited or paid to a contractor during the F.Y more than Rs 100000 Individual/HUF need not deduct tax where sum is credited or paid exclusively for personal purposes

PAYER Central/state govt. local authority, central/state/provincial corpn., company, firm, trust, registered society, cooperative society, university established under central/state/provincial act, declared university under the UGC act, govt. of foreign state or a foreign enterprise, any association or body established outside India, Individual/HUF has total sales, gross receipt or turnover from business or profession carried on by him exceeding Rs 1 crore in case of business or Rs 50 Lakh in case of profession

PAYEE Any resident contractor for carrying out any work (including supply of work)

TDS IS DEDUCTED AT THE RATE OF  1% of sum paid or credited, if the payee is an individual or HUF 2% of sum paid or credited, if the payee is any other person

At the time of credit of such income to the account of the contractor or at the time of payment, whichever is earlier.

TDS under Section 194H: Commission or Brokerage

THRESHOLD LIMIT FOR DEDUCTION More than Rs 15000 in a F.Y

PAYER Any person (an individual or HUF whose total sales, gross receipts or turnover from business exceed Rs 1 crore or Rs 50 Lakh in case of profession in the immediately preceding F.Y) responsible for paying commission or brokerage

PAYEE Any resident

TDS IS DEDUCTED AT THE RATE OF 5% At the time of credit of such income to the account of the payee or at the time of payment, whichever is earlier.

TDS under Section 194J: Fees for professional or technical services / royalty / non competent fees / director’s remuneration

THRESHOLD LIMIT FOR DEDUCTION More than Rs 30000 in a F.Y., for each category of income (however, this limit does not apply in case of payment of directors remuneration)

PAYER Any person, other than an Individual/HUF; However, in case of fees for professional or technical services paid or credited, individual or HUF whose total sales, gross receipts or turnover from business or profession exceed the monetary limits specified u/s 44AB in the immediately preceding F.Y., is liable to deduct tax u/s 194J, except where fees for professional services is credited or paid exclusively for his personal purposes.

PAYEE Any resident

TDS IS DEDUCTED   Fees for technical services (not being a professional services) @ 2%

Royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films @2%

In the case of a payee, engaged only in the business of operation of call centre @2%

In all other cases (fees for professional service, other royalty, any remuneration or fees or commission, by whatever name called, other than those on which tax is deductible under section 192, to a director of company, non competing fees) @10%

At the time of credit of such income to the account of the payee or at the time of payment, whichever is earlier.

TDS under Section 194M: Payments to Contractors, Commission/Brokerage, Fees for Professional Services

THRESHOLD LIMIT FOR DEDUCTION More than Rs 5000000 in a F.Y

PAYER Individual or HUF does not exceed Rs 1 crore in case of business or Rs 50 Lakh in case of profession other than those who are required to deduct tax at source u/s 194C or 194H or 194J (other than for personal purpose)

PAYEE Any resident

TDS IS DEDUCTED AT THE RATE OF 5% At the time of credit of such income to the account of the payee or at the time of payment, whichever is earlier.

Connection Between Sections 194C, 194H, 194J, and 194M 

ARE ALL TO BE SEEN CONCLUSIVELY?

So , as after referring to the provisions mentioned above , It’s clear that ALL OF THE THREE i.e., TDS u/s 194C 194H AND 194J are applicable only when Individual/HUF has total sales, gross receipt or turnover from business or profession carried on by him exceeding Rs 1 crore in case of business or Rs 50 Lakh in case of profession .

SO WHAT IF THE TOTAL SALES, GROSS RECIEPTS OR TUENOVER DO NOT EXCEED THE RESPECTIVE  THRESHOLD ?

SO HERE COMES IN EXISTENCE TDS u/s 194M .

It means that when TDS u/s 194C , 194H or 194 J don’t apply due to threshold limits ..194M applies PROVIDED the payment is MORE than Rs 5000000 in a F.Y .

SO YES , THESE ALL HAVE TO BE READ CONCLUSIVELY .

HENCE WHENVER REFERRING TO TDS u/s 194C ,194H OR 194J , ONE SHOULD ALWAYS KEEP IN MIND THE PROVISIONS OF TDS u/s 194M .

Conclusion:

Understanding the nuances of TDS under Sections 194C, 194H, and 194J is crucial for businesses and individuals. However, the introduction of Section 194M adds another layer, making it imperative to consider all provisions conclusively. Businesses and taxpayers must navigate these regulations carefully to ensure compliance and avoid any repercussions.

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By Yash Agarwal (CA Intermediate), Institute of Chartered Accountants of India.