TDS obligation of Individual and HUF


When Individual/ HUF are required to deduct tax at source under these five sections?

Consider  the following proviso to section 194A(1):

“An individual or a Hindu undivided family(HUF), whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under section 44AB (a)/(b) during the financial year immediately preceding the financial year in which interest is credited or paid, shall be liable to deduct income-tax under this section.”

Similar provision has been incorporated under section 194C, 194H, 194 I and 194J.

On careful reading of the above proviso, liability of Individual / HUF to deduct tax at source arises under these five sections while making payment/giving credit during the financial year 2018-19 only when they were required to get their accounts audited under section 44AB(a)/(b) for the preceding financial year i.e. 2017-18.

On careful reading of the above provision, one can conclude that individual / HUF are under no obligation to deduct tax at source for the payments made under these sections during financial year 2018-19 if they were subject to tax audit under clause (c), (d) and (e) of Section 44AB for the financial year 2017-18.

Relaxation to Individual / HUF from TDS obligation if payment is exclusively for personal purpose

As per the provisions of section 194 C(4), an individual or HUF shall not be liable to deduct income tax on the sum credited or paid to the account of contractor where such sum is exclusively for personal purposes.

Similar relaxation is also found under section 194J of the Income Tax Act, 1961.

Readers shall be careful that the abovementioned relaxation is not availablefor the payments / credit falling under section 194A, 194 H and 194I.

Practical Situations for BRAINSTORMING

Issue No. 1

Mr. Mohan is a practicing Chartered Accountant. His gross receipts for the previous year 2017-18 were Rs. 78 Lac. He wants to make following payments during financial year 2018-19.

  1. Rs. 35,000 to a contractor for repairing of flat exclusively used for residential purpose.
  2. Rs. 88,000 to a contractor for repairing of office.
  3. Rs.2,40,000 (monthly rent Rs. 20,000) to a landlord towards rent of flat exclusively used for residential purpose.
  4. Rs. 50,000 to a hospital for his operation.

Advise him with regard to TDS obligation, if any.

Issue No. 2

Consider following changes in issue No. 1 above.

  • Gross receipts of Mr. Mohan for the previous year 2017-18 were Rs. 48 Lac.
  • He had not disclosed minimum income for the previous year 2017-18 as required by section 44ADA of the Act
  • Therefore, he got his accounts audited under section 44AB(d) for the previous year 2017-18.

Advise him with regard to TDS obligation, if any.

Once you are done with your solution, check it out the answer in the video link:

TDS obligation of Individual / HUF under sections 194A, 194C, 194 H, 194 I and 194 J



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CA Mehul Thakker 
on 07 January 2019
Published in Income Tax
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