Section 194M TDS on Payment to resident contractors and professionals

(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 :

1. Annual payment is upto Rs. 50 lakh.
2. Individual/HUF is liable to audit under Income tax.
   (Individual/HUF liable to audit under Income tax will deduct TDS u/s 194C/194J)

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

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