TDS to be deducted by Individual/HUF u/s 194M on payment exceeding 50 lakhs to contractors and professionals even for personal work w.e.f. 01.09.2019
At present, under Income Tax Act, there is no provision placing a liability on an individual or Hindu undivided family (HUF) to deduct tax at source on any payment made to a resident contractor or professional when it is for personal use.
Further, if the individual or HUF is carrying on business or profession which is not subjected to audit, there is also no obligation to deduct tax at source on such payment to a resident, even if the payment is for the purpose of business or profession.
Section 194M inserted w.e.f. 01.09.2019
To plug this loophole for possible tax evasion, the Union Budget 2019-20 has been proposed to insert a new section 194M in the Act to provide for levy of TDS at the rate of 5% on the sum, or the aggregate of sums, paid or credited in a year on account of contractual work or professional fees by an individual or a Hindu undivided family, not required to deduct tax at source under section 194C and 194J of the Act, if such sum, or aggregate of such sums, exceeds fifty lakh rupees in a year.
However, in order to reduce the compliance burden, it has been proposed that such individuals or HUFs shall be able to deposit the tax deducted using their Permanent Account Number (PAN) and shall not be required to obtain Tax deduction Account Number (TAN).
This amendment will take effect from 1st September, 2019.----------- Similar Posts: -----------