TDS on Payments to Contractors or Professionals by Certain Individuals or HUFs
Introduction
As per section 194M, individuals and HUFs who are not liable to deduct tax under Sections 194C, 194H, or 194J must deduct TDS at 2% on payments to contractors, commission agents, brokers, or professionals if the total amount exceeds Rs. 50 lakh in a financial year.
Key Provisions
- Deductor:
o Individuals or HUFs whose previous year’s turnover does not exceed Rs. 1 crore (business) or Rs. 50 lakh (profession).
o Individuals or HUFs making payments for personal purposes.
- Deductee:The recipient must be a resident. For non-residents, TDS is deducted under Section 195.
- Threshold:TDS applies only if aggregate payments exceed Rs. 50 lakh in a financial year.
- Rate of TDS:
o 2%
o Higher rates apply if PAN is not provided (Section 206AA).
- Time of Deduction:At the time of credit or payment, whichever is earlier.
Types of Payments Covered
- Contractual Payments:Includes labour supply, job work, advertising, catering, transportation, and broadcasting or telecasting.
- Commission (excluding insurance commission) or Brokerage.
- Professional Services.
Exemptions from TDS
- Government, RBI, and Tax-Exempt Entities:No TDS by virtue of section 196.
- Payments BelowRs. 50 Lakh: No TDS if the total amount in a financial year does not exceed Rs. 50 lakh.
Compliance Requirements
- TAN Not Required:Deductors can use their PAN instead of obtaining a TAN.
- Lower/Nil Deduction Certificate:Available under Section 197, but not through self-declaration under Section 197A.
- Deposit of TDS:
o Payable within 30 days from the end of the month in which TDS was deducted.
- TDS Statement Filing:Form 26QD must be filed electronically.
- TDS Certificate:Form 16D must be issued within 15 days from the due date of Form 26QD filing.
Consequences of Non-Compliance
- Failure to Deduct or Deposit TDS:
o Interest liability under Section 201.
o Penalty under Section 271C (up to the non-deducted amount).
o Prosecution under Section 276B.
- Failure to Furnish TDS Statement:
o Rs. 200 per day penalty under Section 234E (limited to TDS amount).
o Additional penalties under Sections 271H and 272A.
- Failure to Issue TDS Certificate:Penalty under Section 272A.