CA Piyush Agarwal
The Union Budget 2019 for the FY 2019-2020 was presented on 05th July 2019. The Budget proposed new Sections for TDS such as 194M which is applicable from 01st September, 2019.
Reason for introduction of Section 194M
This section was introduced for the purpose to cover some specified high value transactions in personal nature under TDS which was previously excluded from TDS provisions.
As per existing provisions of 194J and 194C, individual & HUF are not required to deduct TDS if: -
• Payment made exclusively for personal purposes
• Payment made for other than personal purpose but individual & HUF are not required to get their accounts audited.
• A major amount of payment made for contractual works and professional fees was escaping the levy of TDS because of this exemption, creating a scope for tax evasion.
Meaning of Section 194M
• An individual and/or Hindu undivided family (HUF) has to deduct tax at source under Section 194M. Such individuals and HUF must not be required to get their books of accounts audited.
• It applies when the total amount paid to a resident individual, for carrying out any contractual work or providing any professional service, in a financial year exceeds Rs 50,00,000.
• If they are required to get Books of Accounts audited, TDS deduction is applicable as per Section 194C and 194J. The individual and/or HUF who have to deduct TDS under Section 194C (TDS on payment to a contractor) and 194J (TDS on payment on professional fees) do not have to deduct tax at source under Section 194M.
• The individual or HUFs who has to deduct tax can pay the tax to the government by quoting his or her PAN only. Not required to get a tax deduction account number (TAN) for TDS deduction.
• Payments to non-residents are not covered under this section.
If any payment is made to a resident contractor or a resident professional for carrying out any work in nature of personal purpose.
As per the Union Budget 2019, any individual/HUF paying any sum to a resident, for carrying out any work (including the supply of labour) under any contract or by way of fees for professional services rendered during the financial year, exceeding Rs 50,00,000 in a year will have to deduct TDS at 5%.
If any payment is made to a resident by way of commission or brokerage by an individual or HUF who are not required to get their books of accounts audited.
Let's take an example, Mr. Ram made a payment of Rs. 50L for professional services on 18thAugust, 2019, In this case TDS will not be deducted as amount of payment does not exceed Rs. 50 Lakh.
Meaning of Work (same as 194C)
• Advertising
• Broadcasting and telecasting including production of programs for such broadcasting or telecasting.
• Carriage of goods and passengers by any mode of transportation, other than railways.
• Catering.
• Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer. But does not include manufacturing or supplying a product according to the requirements or specifications of a customer by using material purchased from a person, other than such a customer.
• Contract: This expression includes sub-contract.
Meaning of Professional services (same as 194J)
• Professional fees
• Fees for technical services
• Remuneration paid to directors excluding salary means which is not liable to TDS u/s 192 (For example, sitting fees to attend board meetings,)
• Royalty
• Payments in the nature of non-compete fees (i.e., fees paid to not carry on any business or profession for a specified time and within certain geographical boundaries) or fees paid to not share any technical knowledge or know-how.
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