Tax Deduction under section 194M

[PRIYAM KHAMBHATA]

Respected Sir

Please guide me on my query state as under

Whether TDS Provision under section 194M is applicable to an Individual, who is doing construction works on his Land. The amount of construction work is exceeding of Rs. 50 Lakh during the year under consideration. There is no execution of Contract Agreement between Individual and Contractor.

Thanks

[YAGAY and SUN]

Section 194M of the Income Tax Act applies to individuals or Hindu Undivided Families (HUFs) who are not required to deduct TDS under sections 194C or 194J, but who make payments exceeding ₹50 lakh in a financial year to a resident contractor or professional for carrying out any work, including construction. The applicability of TDS under this section does not depend on whether there is a formal written contract; even in the absence of a contract agreement, if the individual pays more than ₹50 lakh for construction work to a contractor during the financial year, TDS at the rate of 5% is required to be deducted under Section 194M.

Therefore, in your case, even though there is no formal contract executed between the individual and the contractor, the nature of payment for construction work and the threshold being crossed makes Section 194M applicable. The individual must obtain a Tax Deduction Account Number (TAN is not required under 194M) and deposit the TDS using Form 26QD within 30 days from the end of the month in which the payment is made.

AI Summary

TDS under section 194M applies to individuals and HUFs paying contractors over the prescribed threshold; deduct TDS and deposit promptly.
TDS on payments to resident contractors or professionals applies to individuals and HUFs not obliged to deduct under other contractor/professional provisions when aggregate payments for work, including construction, exceed the statutory threshold in a financial year; applicability is independent of a written contract. The payer must deduct the required TDS and deposit it using the prescribed electronic form within the specified time from the end of the month in which payment is made, following the stated identification and reporting formalities.