Under the provisions of Section 194C and Section 194J, an individual or HUF are not liable to pay tax if they are not liable to get the tax audited under Section 44AB(a)/44AB(b).

So, an individual or HUF need not get the tax deducted from the payment which they made to contractor or professional for the services received exclusively for personal benefits and for the business/profession if the payer is not subject to tax audit under section 44AB(a)/(b).

This exemption led the substantial payments, which were made by individuals or HUFs for contractual work or professional services, out of TDS ambit which further led the loophole for tax evasion.

Amendment for a New TDS Section 194M

So a proposal has been made to add a new section- Section 194M in the act for levying 5% TDS on the amount paid or credited for the contractual work, including the supply of labour for any work, or professional fees in a year by an individual or a HUF if aggregate annual amount is more than Rs. 50 lakhs.

It should be noted that it excludes the individuals who need to get the tax deducted as per the provisions of section 194C or section 194J. However, to abbreviate the compliance burden, an amendment is proposed which states that such individuals or HUFs can deposit the tax deducted using their PAN and will not have to mandatorily obtain the TAN. This amendment will come into effect from 1st September 2019.

Meaning of Work, Contract and Professional Services for the Purpose of this Section

Cause (iii) and Clause (iv) of the Explanation to Section 194C defines the meaning of “contract” and “work” for the purpose of TDS deduction, while clause (a) of the Explanation to section 194J defines the meaning of professional services for the same purpose.

Procedural Aspects of TDS Section 194M

Let’s have a look on the procedural aspects of TDS section 194M given below:

Challan-cum-statement for TDS Payment u/s 194M

Under section 194IB, there is challan-cum-statement in Form 26QC for the payment of TDS by individual or HUF paying a monthly rent of more than Rs 50,000.
Under section 194IA, there is challan-cum-statement in Form 26QB for the payment of TDS by a person paying consideration for the transfer of immovable property of 50 lacs or above.
Similarly, Govt. may prescribe challan-cum-statement for the payment of TDS under the new section 194M.

Nil / Lower TDS Certificate Under Section TDS 194M

Under Section 197, a deductee can apply for nil or lower TDS certificate if his estimated tax liability approves no or tax deduction. The scope of Section 197 has been extended to this provision. So a payee can make an appeal to the Assessing Officer regarding obtaining such certificate for the amount paid or payable which are subject to TDS u/s 194M.

Due Date Under TDS Section 194M

Under section 194M, no due date has been prescribed separately for depositing the tax deducted. So, the due dates for the TDS payment under the new Section 194M shall remain the same, i.e., the timeframe of 30 days from the end of the month in which tax is deducted.

Note: Liability for tax audit and purpose of maying payment plays an insignificant role in TDS payment under section 194M