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Section 194M was inserted with effect from 1st September, 2019. The provisions of this section is applicable on those individuals and HUFs who are not required to deduct tax as per the provisions of section 194C, 194H or 194J. At present, there is no obligation to deduct tax on payment made to resident contractors and professionals even by individuals and HUFs carrying on business or profession not subject to audit. So there is possibility for tax evasion and in order tackle it new section 194M has been inserted in the Act. This section is also having effect on individuals engaged in activities other than in the course of his business.

The provisions of this section are as follows:

· Tax has to be deducted at the rate of 5% by an individual or a HUF responsible for paying any sum during the financial year to any resident:

· The tax should be deducted at the time of credit of such sum or at the time of payment, whichever is earlier.

· Tax at the rate of 5% has to be deducted, if the aggregate amount credited or paid during the financial year exceeds Rs.50 Lakhs.

· Requirement for obtaining Tax deduction Account Number (TAN) is not applicable to a person who is required to deduct tax under this section. The individual or HUFs can deposit the tax deducted using his PAN.

· Payments made to non-residents are not covered under this section, but covered under section 195.

· The CBDT has notified that any sum deducted under section 194M shall be paid to the credit of the Central Government within a period of 30 days from the end of the month in which the deduction is made by preparing a challan-cum-statement in Form No.26QD.

Threshold limit of Rs.50 lakh for the year of introduction, i.e 2019-20 financial year is a disputable point. As per the act, limit for the financial year is to be considered, i.e for the period from 1stSeptember, 2019 to 31st March, 2020 if the payment is over Rs 29000/-, section 194 M is to be complied.


The new amendment made in the Act by the Government would help to avoid the possible tax evasion and to widen the tax base. Now a days individuals are frequently entering into contracts for construction of houses etc., paying commission for purchase/sale of properties and paying professional charges in his day-to-day life. Due to this reason, the section has got far reaching consequence as in many cases, such activities will have impact on his personal income tax liability.


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