TDS u/s 194M

[Swaminathan Balasubramanian]

Dear sir

My query is regarding the threshold limit of ₹ 50 lakhs. I have been making payments to the contractor from 1st Apr 2019 and the total paid so far is ₹ 50 lakhs. When I make the next payment, say another ₹ 5 lakhs, what is the TDS to be deducted? Is it for ₹ 5 lakhs or for ₹ 55 lakhs.

Thanks

Balasubramanian

[RAJA SWAMINATHAN]

Section 194 M is reproduced below:

Any person, being an individual or a Hindu undivided family (other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H or section 194J) responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract, by way of commission (not being insurance commission referred to in section 194D) or brokerage or by way of fees for professional services during the financial years, shall, at the time of credit of such sum or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to five per cent. of such sum as income-tax thereon:

On Plain reading of the section in case the Payment exceeds ₹ 50 Lakhs recovery of TDS has to be done on the total amount Paid @ the rate of 5% and not on the excess amount above 05 Lakhs.

AI Summary

TDS under section 194M applies at the statutory rate to the entire payment once the annual threshold is crossed. Individuals and Hindu Undivided Families required to deduct under Section 194M must deduct tax at the time of credit or payment of sums for work, commission, brokerage or professional fees. When aggregate payments to a contractor exceed the statutory threshold in a financial year, the deduction obligation applies to the entire amount paid or credited, not solely to the excess, and tax must be withheld at the statutory rate on the total sum.