(Applicable from 1 September 2019)
As per section 194M
TDS is to be deducted by Individual/HUF at 5% on payment made to resident contractors and professionals.
However no TDS to be deducted if :
- Annual payment is upto Rs. 50 lakh.
-
Individual/HUF is liable to audit under Income tax.
(Individual/HUF liable to audit under Income tax will deduct TDS u/s 194C/194J)
| SECTION | DESCRIPTION | CUTOFF | RATE OF TDS |
| 194M | Payment to resident contractors and professionals | Rs.50 Lakh | 5% |
Changes in 194M Due to Lockdown
However,Due to Lockdown,Government has temporarily reduced Rate by 25%
hence,TDS Rate on Payment to Resident Contractors and Professionals is Changed as follows
| Current Rate | New Rate (Temporary) | |||||||
| TDS on Payment to Resident Contractors and Professionals | 5% | 5%*75%=3.75% | ||||||
Note - This New Rate is Temporary only if TDS Deducted form 14 May 2020 to 31 Mar 2021
After this old Rate will be applicable
Normal challan 281 and return 26Q are not applicable in this section.
In this case Individual/HUF need to fill common challan and return form.
This form is yet to be notified.
Example 1
Suppose an individual receives a bill of advertisement charges for Rs. 5200000
Whether TDS to be deducted or not?
Answer
Yes,TDS will be deducted u/s 194M as the payment exceeds Rs 5000000.
TDS to be deducted = Rs. 5200000*5% = 260000
Net amount to be paid =Rs. 5200000 - 260000 = 4940000
Example 2
Suppose in above example the individual is liable to audit under Income tax
Whether TDS to be deducted?If yes,under which section?
Answer
Yes,TDS will be deducted
But as individual is liable to audit so TDS u/s 194C will be deducted
TDS to be deducted = Rs. 5200000*1% = 52000
Net amount to be paid =Rs. 5200000 - 52000 = 5148000
