What is Section 194M of the Income Tax Act? Applicability, TDS Rate & Filing Guide
By CapitalKeeper | Beginner’s Guide | Indian Sock Market | Market Moves That Matter I 06th June 2025
What is Section 194M of the Income Tax Act? A Simplified Guide for Individuals and HUFs
If you’re an individual or a Hindu Undivided Family (HUF) making significant payments for professional or contractual services, you may now be liable to deduct tax at source (TDS) under Section 194M of the Income Tax Act.
Introduced in the Finance Act of 2019, Section 194M is a crucial provision aimed at widening the TDS net and curbing tax evasion in the informal sector.
Let’s break down this section in simple terms and explain its relevance for regular taxpayers like you.
🔍 What is Section 194M?
Section 194M mandates TDS on payments made by individuals or HUFs (who are not required to deduct TDS under section 194C or 194J) if the total payments exceed ₹50 lakhs in a financial year for the following services:
- Contractual work
- Professional services
- Commission or brokerage (not related to insurance)
🧾 Who Does It Apply To?
Section 194M applies to:
✅ Individuals and HUFs
✅ Not required to audit their books under Section 44AB
✅ Making personal or business payments over ₹50 lakh/year
✅ Not deducting TDS under sections 194C, 194H, or 194J
🔔 Even if you’re not running a business but paying professionals (like architects, event managers, or interior designers) beyond the limit, 194M applies to you.
💼 Real-Life Example
Let’s say you’re building a house and you pay:
- ₹30 lakhs to a contractor
- ₹22 lakhs to an architect
Total = ₹52 lakhs
Since the total exceeds ₹50 lakh, you’re required to deduct 5% TDS on the entire amount exceeding the threshold under Section 194M.
📊 Key Highlights of Section 194M
| Particulars | Details |
|---|---|
| Who must deduct TDS? | Individual or HUF (not liable for tax audit) |
| When applicable? | Payment > ₹50 lakh/year |
| TDS Rate | 5% (without surcharge or cess) |
| TAN Required? | ❌ No |
| TDS Deposit Due | Within 30 days using Form 26QD |
| TDS Certificate | Form 16D within 15 days of deposit |
📎 No TAN? No Problem
Unlike other TDS sections, Section 194M doesn’t require a Tax Deduction and Collection Account Number (TAN). You can deposit TDS using your PAN via Form 26QD, making it more user-friendly for individuals.
📅 Due Dates You Must Remember
| Activity | Due Date |
|---|---|
| Deposit TDS (Form 26QD) | Within 30 days from end of month in which TDS was deducted |
| Issue TDS Certificate (Form 16D) | Within 15 days from filing Form 26QD |
📌 How to File TDS Under Section 194M
- Visit: https://www.tin-nsdl.com
- Fill Form 26QD: Provide PANs, amount paid, TDS deducted
- Pay Online: Generate challan and make payment via net banking
- Download Form 16D: Use TRACES portal to generate TDS certificate
❗ Penalty for Non-Compliance
Failing to deduct or deposit TDS under 194M may lead to:
- Interest under Section 201(1A)
- Penalty under Section 271C
- Disallowance of expense under Section 40(a)(ia) (for business-related payments)
💡 Financial Advisor’s Take
Section 194M is especially important for high-net-worth individuals, professionals, or families managing large construction, wedding, or consultancy budgets.
By following this provision:
- You avoid penalties
- You ensure your payments are tax-compliant
- You demonstrate financial discipline in high-value personal dealings
📝 Conclusion: Section 194M is Not Just for Business Owners
Gone are the days when TDS applied only to companies or large firms. Section 194M brings TDS obligations to ordinary individuals and families making high-value payments. With digital platforms like Form 26QD, compliance has become easier than ever.
Always consult your CA or tax advisor before making large payments. If you’re planning a wedding, house construction, or hiring high-value professionals — Section 194M should be on your radar.
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