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:
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.
Following are the specified payments which are covered under this section:
Payment to a resident contractor by an individual or HUF for carrying out work in the nature of personal purpose and “work” here means :
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 :
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.
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 :
whichever is earlier.
Following persons are liable to deduct TDS under this section :
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.
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.
Example :
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%.
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 |
In this case, contract was entered before 01Sep, 2019 but payment was made before 01 September, 2019 hence TDS will not be deducted.
Challan for payment of TDS under this section is yet to be notified by the government.
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.
When tax is deposited to government through challan, the tax will appear in 26AS of the deductee and deductee can claim credit of TDS.
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 |
