TDS-194M Contract

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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)

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)

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)

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)

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)

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)

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)

29 September 2025 Good luck..

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