CBDT: Individuals have to issue TDS certificate on deducting tax on payment to contractors

By Notification No. 98/2019 [F.No.370142/30/2019-TPL] / GSR 858(E) CBDT notifies the Challan-cum statement for the purpose of individuals to deduct taxes on payment to contractors or professionals under section 194M of Income-tax Act, 1961 dated 18 November 2019.

Section 194M

As per the existing provisions of Section 194C and Section 194J, an individual or HUF, who are not liable to tax audit under Section 44AB(a)/44AB(b), shall not be required to deduct tax under the provisions of section 194C & 194J. Due to this many payments made by individuals or HUFs in respect of contractual work (say payment made to builders) or for professional services (say payment made to lawyers) are out of the purview of TDS leading to tax evasion.

To cover up this loophole income-tax act has introduced a new section 194M which requires individuals and HUF not covered u/s 194C & 194J to deduct TDS on payment made to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract, by way of commission (not being insurance commission referred to section 194d) or brokerage or by way of fees for professional services during the financial year.

Below are the few important points to be kept in mind regarding section 194M:

• Who is responsible to deduct tax: Individual or HUF making payment in pursuance of a contract or in the nature of the commission, brokerage or professional fee and are not covered u/s 194C, 194D & 194J.
• Monetary limit: TDS is required to be deducted only if the sum paid or aggregate of the sum paid during a financial year exceeds Rs 50 lakhs.
• Rate of TDS: 5%
• The time limit for deposit of tax deducted: any sum deducted under section 194M shall be deposited within a period of thirty days from the end of the month in which the deduction is made. The payment can be made using a challan cum statement in Form No 26QD
• Furnishing of certificate: every person responsible for deduction of tax under section 194M shall furnish the certificate of deduction of tax at source in Form No.16D to the payee within fifteen days from the due date for furnishing the Challan-cum-statement in Form No.26QD

How to make payment of TDS deducted u/s 194M:

Go on to the page payment of taxes using link https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp

Select form 26QD (to be updated soon) and fill relevant details and proceed to pay. After payment of taxes save challan details generated on payment of taxes.

How to download form 16D:

After payment of taxes, you have to download form 16D (Certificate for payment of TDS u/s 194M) from the TRACES website.

For downloading Form 16D follow the following steps.

• Visit www.tdscpc.gov.in.

1. Register as a taxpayer
2. Fill relevant details (PAN, DOB, NAME)
3. Fill challan details generated on payment of taxes and submission of Form 26QD. (Column on the website to be updated soon).
4. After filling all the relevant details submit the form and you will get registered on traces website.
5. Now login to traces website and go to download option to download Form 16D

Note: Form 26QD and Form 16D are still to be updated on the traces website