Who is required to deduct tax under 194M ?

Every Individual and HUF, who are not liable for deduction of tax under 194C , 194H , and Section 194J is required to deduct tax at the rate of 2% from the payment made to a contractor or commission agent or broker, or professional respectively.

In other words, the following persons are required to deduct tax under this section:

 a)  An individual or HUF whose gross receipts or turnover in the financial year immediately preceding the financial year, in which amount is paid or credited, does not exceed the threshold limit of Rs. 1 crore in case of a business and Rs. 50 lakhs in case of a profession; or

 b)  An individual or HUF making payment to a contractor, commission agent, broker, or professional for personal use.

The tax shall be deducted under this provision even if the individual is not engaged in any business or profession or if he is just earning salary or any other income.

When this section is applicable?

Tax is required to be deducted under this section only if the sum is payable to a person who is a resident of India. The tax is deducted at the time of payment or at the time of credit of the sum, whichever is earlier. Further, tax is required to be deducted only if the amount of payment exceeds Rs. 50 lakhs during the financial year.

How and when to file the TDS return?

To file the TDS return, the deductor has to fill out a challan cum statement in Form 26QD within 30 days from the last day of the month in which the tax has been deducted.

What are the consequences of failure to furnish TDS return?

If a person fails to file the TDS statement within the time then he shall be liable for payment of fee under Section 234E at the rate of Rs. 200 per day during which such default continues. However, such fee shall not exceed the amount of TDS. Further, he may also be liable for payment of penalty under Section 271H and Section 272A.