Section 194M – Deduction of TDS by Individual and HUF from payments to contractors and professionals

A new section 194M has been proposed in the Budget of 2019 wherein an individual or an HUF (those not covered in TDS), is now required to deduct TDS @ 5% for payments exceeding Rs. 50 lakhs in a year to a resident contractor or to a professional (as defined u/s Section 194C and Section 194J respectively)

The original text of the proposed section reads as under:

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.


This amendment will take effect from 1st September, 2019

Section 194M – Rationale & Brief Analysis

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