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Section 194M – TDS on payment to resident contractors and professionals

The Finance Act, 2022 introduced TDS on resident contractors and professionals payments through Section 194M, effective from 1st September, 2019. This section applies to payments made by individuals or HUF related to a contract, commission, brokerage, or professional services fees. This was introduced to combat tax evasion seen when individuals or HUF received income without tax payment. 

TDS applies only when the sum exceeds 50,00,000 in the financial year

194M Payment Types:- 

Payments under 194M include contract, commission or brokerage, and professional services.

1. 'Contract' definition as per section 194C of Income tax.

2. 'Commission or brokerage' as per section 194H of income tax. 

3. 'Professional services' according to section 194J of income tax. 

4. 'Work', defined in section 194C.

Who must deduct TDS under Section 194M?  

Individuals or HUFs, excluding those required to deduct tax under sections 194C, 194H, and 194J, are responsible for TDS under Section 194M.

TDS Deduction Rate under Section 194M 

  • TDS is deducted at 5% from the sum payable to a resident payee/deductee under section 194M.
  • If the payee does not provide a PAN, the TDS deduction rate is 20%.

Form 26QD is used to report TDS transactions for resident contractors and professionals under section 194M. It provides info on TDS on property.

The person responsible for tax deduction must provide details in form 26QD within a month of the tax deduction. The TDS amount should be paid to the government.

TDS to be deducted by/Payer

Any individual or HUF

Deducted on/payee

Any Indian resident

Type of Payment

Payment for contract work (194C), Commission or brokerage (194H), or Professional service (194J).

TDS rate

@5%

No TDS deduction required.

Value doesn't exceed Rs. 50,00,000 annually.

TDS Payment to Government

Form 26QD

 

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The Tax Heaven

Mr.Vishwas Agarwal✍📊, a seasoned Chartered Accountant 📈💼 and the co-founder & CEO of THE TAX HEAVEN, brings 10 years of expertise in financial management and taxation. Specializing in ITR filing 📑🗃, GST returns 📈💼, and income tax advisory. He offers astute financial guidance and compliance solutions to individuals and businesses alike. Their passion for simplifying complex financial concepts into actionable insights empowers readers with valuable knowledge for informed decision-making. Through insightful blog content, he aims to demystify financial complexities, offering practical advice and tips to navigate the intricate world of finance and taxation.

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