All about Section 194M

Section 194M provides for  levy of TDS at the rate of 5% on the sum paid or credited in a year on account of contractual work (including supply of labour for carrying out any work) or professional fees by an individual / HUF ( *other than those who are required to deduct income-tax as per the provisions of section 194C or section 194J), if aggregate of such sum exceeds Rs. 50 lakhs in a year.

However, in order to reduce the compliance burden, such individuals or HUFs can deposit the tax deducted using their PAN and shall not be required to obtain TAN with effect from 01/09/2019.

Applicability :

All individual or HUF, who has to make payment to a resident for a contract work completed or any professional service provided, will have to deduct tax at source u/s 194M.

As per the Union Budget 2019 (Part II),  any individual/HUF paying any sum to a resident, for carrying out any work (including the supply of labour) under any contract or by way of fees for professional services rendered during the financial year, exceeding Rs 50,00,000 in a year will have to deduct TDS at 5%. This section will be effective from 1st September 2019. TDS amount will be deducted on any payment made after this date even if the contract existed before, provided the payment exceeds Rs 50,00,000.

Person has  to deduct tax either at the time of providing a credit of the amount or at the time of payment, whichever is earlier.

The rate if tax for deduction @ 5%.

 This amount is to be deducted only if the aggregate sum exceeds Rs. 50 lakhs to one recipient (payment falling within the provisions u/s 194C or 194J or both together) in one financial year.

CBDT has recently notified Form no. 16D & 26QD for TDS Payment & Return for the purpose of Section 194M. Any sum deducted under section 194M shall be paid to the credit of the Central Government within a period of thirty days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QD. Every person responsible for deduction of tax under section 194M shall furnish the certificate of deduction of tax at source in Form No.16D to the payee within fifteen days from the due date for furnishing the challan-cum-statement in Form No.26QD under rule 31A after generating and downloading the same from the web portal.