What is section 194 M?
It is a newly inserted section in Budget 2019 which is applicable from 01 September, 2019. This section was introduced for the purpose to cover some specified high value transactions in personal nature under TDS which was previously excluded from TDS provisions.
As per existing provisions of 194J and 194C, individual & HUF are not required to deduct TDS if:
- Payment made exclusively for personal purposes
- Payment made for other than personal purpose but individual & HUF are not required to get their accounts audited.
TDS will be deducted if aggregate amount of payment for some specified transactions defined under this section exceed Rs. 50 lakh.
Let’s take an example, A made a payment of Rs. 50L for professional services on 10 September, 2019, In this case TDS will not be deducted as amount of payment does not exceed Rs. 50 Lakh.
Which are the specified payments covered under this section?
Following are the specified payments which are covered under this section:
- Payment (not covered u/s 194C) made to a resident contractor
- Payment (not covered u/s 194J) made to a resident professional
- Payment (not covered u/s 194H) made to a resident individual by way of commission
Given below are the nature of payments not covered u/s 194C, 194J and 194H and will be covered under this new section 194M :
Payment to a resident contractor by an individual or HUF for carrying out work in the nature of personal purpose and “work” here means :
- Broadcasting and telecasting (including the production of programmes)
- Carriage of goods and passengers using any mode of transport (but not railways)
- Manufacturing or supply of a product as per the specification of a customer by using material purchased from him/her. But does not include manufacturing or supplying a product according to the specification of a customer by using material purchased from other than such customer
Payment to a resident professional for giving professional services by an individual or HUF for carrying out work in the nature of personal purpose and “professional services” here means :
- Fees for professional service,
- Fees for technical service,
- Remuneration or fee or commission to a director of a company (which is not liable to TDS u/s 192).
- Non - compete fees which means payment made for not carrying out any business or profession
Payment to a resident individual or HUF by way of commission.
As per clause (iii) of section 194 C, Contract shall include sub-contracts .
One point needs to be noted that insurance commission does not gets covered under section 194M.
What is the rate of TDS u/s 194M & when TDS is required to be deducted ?
As per the provisions of this new section, TDS will be deducted at the rate of five percent (5%) if the aggregate amount of payment exceeds Rs. 50 Lakh in a particular financial year.
In case, PAN is not available, TDS will be deducted at the rate of twenty percent (20%).
TDS is required to be deducted at time of :
- Credit of the amount.
- Payment by cash or by the issue of a cheque or draft.
whichever is earlier.
Who is responsible to deduct TDS ?
Following persons are liable to deduct TDS under this section :
- Any individual or
If any payment is made to a resident contractor or a resident professional for carrying out any work in nature of personal purpose
If any payment is made to a resident by way of commission or brokerage by an individual or HUF who are not required to get their books of accounts audited.
Some important points
- This section is not applicable to non residents.
- Lower TDS certificate can be submitted under this section.
- Quote PAN in place of TAN : Government has given relaxation under this section, individual or HUF can deposit TDS to the government using PAN in place of TAN and TAN is not required to be obtained.
- This section is applicable from 01 September, 2019.
If contract is entered before 01 September, 2019 and payment made after this date, in that case TDS will be deducted subject to amount of payments exceeds Rs. 50 lakh.
Lets say, contract entered on 05 July, 2019 but payment was made on 05 September, 2019 of Rs. 52 Lakh.
In the above case, TDS will be deducted on Rs. 52 Lakh @ 5%.
Frequently Asked Questions
Q- A made a payment of Rs.55 Lakh for professional services on 05 September, 2019. Whether TDS will be deducted in this case and if yes, on what amount ?
In the above case, TDS will be deducted as amount of payment exceeds Rs. 50 Lakh and TDS will be deducted on Rs. 55 lakh as explained in the below table :
|Particular||Amount ( Rs.)|
|Total Amount of payment||55 lakh|
|Amount on which TDS to be deducted||55 lakh|
|TDS @ 5%||2.75 lakh|
Q- A entered into a contract of catering on 25 July, 2019 and payment made of Rs. 55 Lakh on 30 August, 2019. Whether TDS will be deducted in this case ?
In this case, contract was entered before 01Sep, 2019 but payment was made before 01 September, 2019 hence TDS will not be deducted.
Q- How to pay TDS amount to government under this section ?
Challan for payment of TDS under this section is yet to be notified by the government.
Q- A made a payment of professional fees of Rs. 55L , and A is liable to get his accounts audited under section 44 AB. Whether TDS is required to be deducted under this section ?
As per this section, individuals who are required to get their accounts audited are not covered hence TDS will not be deducted under this section.
Q- How deductee will get the credit/refund of the tax deducted ?
When tax is deposited to government through challan, the tax will appear in 26AS of the deductee and deductee can claim credit of TDS.
Q- An individual receives a bill of catering of Rs. 42 Lakh and a bill of consultancy of Rs. 10 Lakh from one single person. Whether TDS will be deducted ?
The threshold limit of Rs. 50Lakh is aggregate limit for both professional and contractual work hence TDS will be deducted.
|Particular||Amount ( Rs.)|
|Catering Bill||42 Lakh|
|Consultancy Bill||10 Lakh|
|Total Bill||52 Lakh|
|TDS to be deducted on||52 Lakh|
|TDS @ 5%||2.6 Lakh|
People also ask
- The Most Comprehensive Guide on TDS in India
- TDS Return Filing Online
- Form 16B
- Form 16C
- Form 15G & 15H: Save TDS on Interest Income
- TRACES Login: Login into TDS TRACES Website
- TRACES Registration: Register on TDS TRACES Website
- Section 192 : TDS on Salary Computation under Income Tax Act
- Section 194L Series : Payment of Compensation on Acquisition of Capital Asset
- Section 194A: TDS on Interest other than Interest on Securities
- Section 194B & 194BB : TDS On Winning From Lottery Or Race Horse
- Section 194D & Section 194DA : TDS on Insurance Commission
- Section 194H: TDS on Commission & Brokerage
- Section 194I, 194IB & 194IC: TDS On Rent
- Section 194-IB: TDS On Rent Of Property
- Section 194G & Section 194H under Income Tax Act
- Section 194M: TDS on Payment to Resident Contractors and Professionals
- Section 195: TDS on NRI Selling Property In India
- TDS Challan ITNS 281: Pay TDS Online with e-Payment Tax
- TDS Payment Online: Procedure & Types Of Challans
- OLTAS Application: View challan status on TRACES
- Section 44AD: Presumptive Taxation Scheme
- TDS on Withdrawal from the EPF Account
- TDS Return on Salary Payment
- TDS Return on Payments to NRIs
- TDS on Purchase of Immovable Property
- TDS Return filing for Non Salary Deductions
- Post Office Monthly Income Scheme: Interest Rate & Features
- Difference between TDS in Income Tax and TDS in GST
- TDS Return Filing Online: Eligibility, Due Dates & Revised TDS
- Form 16B: Download TDS Certificate for Sale of Property
- Form 16C: TDS Certificate for Rent of Property
- Form 24Q: TDS Return on Salary Payment
- Form 26Q: TDS Return filing for Non Salary Deductions
- Form 26QB: TDS on Purchase of Immovable Property
- Form 27Q: TDS Return on Payments to NRIs