Deduction of tax by certain individuals or HUF : Section 194M

Presently, there is no requirement for an individual or HUF to deduct tax at source on payments made to a resident contractor or professional when :

• for personal use, or

• if the individual or HUF is not subjected to audit for his business or profession.

It is proposed to insert a new provision making it obligatory for such individual or HUF to deduct tax at source at the rate of five per cent. if the annual payment made to a contractor or professional exceeds Rs. 50 lakh.

It is also proposed that a person deducting tax under this section shall be able to deposit TDS on the basis of the Permanent Account Number (PAN) only. It is also proposed to enable filing of application for issue of certificate for nil or lower rate of TDS.

Text of Section is given below:

194M. (1) 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 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 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:

Provided that no such deduction under this section shall be made if such sum or, as the case may be, aggregate of such sums, credited or paid to a resident during a financial year does not exceed fifty lakh rupees.

(2) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

Explanation.For the purposes of this section,

(a) contract shall have the meaning assigned to it in clause (iii) of the Explanation to section 194C;

(b) professional services shall have the meaning assigned to it in clause (a) of the Explanation to section 194J;

(c) work shall have the meaning assigned to it in clause (iv) of the Explanation to section 194C.

Source: Finance (No.2) Bill 2019

Tags : Income Tax, TDS, section 194m