TDS-194M Contract

This query is : Resolved

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This discussion clarifies TDS deduction under Section 194M for contract payments. It explains that if a payment crosses a financial year, TDS is calculated based on the financial year the payment is made. If a new contract's total payment in a financial year exceeds the threshold, TDS applies. Importantly, Section 194M applies to services, not material purchases, for which Section 194Q would be relevant.

Ashish Kumar Pandey

Ashish Kumar Pandey (Querist)
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11 April 2025 Dear Sir,
Mr. A is a resident and liable to deduct TDS u/s 194M
Mr. A given a contract to Mr. B for house construction of Rs. 88.00 Lacs on Nov-2024.
Mr. A paid of Rs. 62.00 Lacs to Mr. B in FY 2024-25 and deduct TDS @2% u/s 194M.
Now
Mr. A paid balance payment to Mr. B of Rs. 26.00 Lacs as full & final in April 2025.
TDS deduct or not in balance payment of Rs. 26.00 Lacs as per 194M
due to Payment year change.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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11 April 2025 As the balance payment of ₹26,00,000 does not exceed the threshold of ₹50,00,000 in FY 2025-26, no TDS deduction is required on this payment under Section 194M due to the change in financial year.

Ashish Kumar Pandey

Ashish Kumar Pandey (Querist)
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11 April 2025 Thanks Sir for your reply,
If in other condition
Mr. A further contact place to Mr. B in FY 2025-26 of Rs. 40.00 Lacs and paid
Then TDS 194M applicable on full amount 26+40 Lacs or TDS not applicable in FY 2025-26due to new contract below Rs. 50 Lacs Limit.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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11 April 2025 TDS will be applicable as the payment in the FY will exceed the threshold limit.

Ashish Kumar Pandey

Ashish Kumar Pandey (Querist)
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11 April 2025 Thanks Sir,
If Mr A Purchase Tiles of Rs. 55.00 Lacs from Mr. X and paid within year.
Then TDS 194M applicable or not due to material purchase.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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11 April 2025 No. The section is applicable over the services. For material purchase sec. 194Q is required to be analyzed.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 September 2025 Good luck..

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