TaxTMI 
TaxTMI 
Tax Deduction at Source on Contractual and Professional Payments : Clause 393(1)[Table: S.No. 6(ii)] of Income Tax Bill, 2025 Vs. Section 194M of the Income-tax Act, 1961
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....tial ambiguities, and juxtaposes it with the existing Section 194M to elucidate continuities, changes, and implications for stakeholders. Objective and Purpose The legislative intent behind introducing specific TDS provisions for individuals and HUFs not engaged in business or professional activities, or not otherwise liable to deduct TDS under the main business provisions (such as Sections 194C, 194H, or 194J), is to widen the tax base and plug potential revenue leakages. Historically, individuals and HUFs making high-value payments for personal or non-business purposes could escape the TDS net, creating a compliance gap and facilitating tax evasion or under-reporting by recipients. Section 194M, inserted by the Finance (No. 2) Act, 2019, addressed this gap by mandating TDS on certain payments by individuals/HUFs exceeding a prescribed threshold. The Income Tax Bill, 2025, through Clause 393(1)[Table: S.No. 6(ii)], seeks to continue and rationalize this regime, possibly with refinements in scope, definitions, and compliance requirements, as part of a broader overhaul of the TDS framework. Detailed Analysis of Clause 393(1)[Table: S.No. 6(ii)] of the Income Tax Bill, 2025 ....
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....r decoration, etc. * "Commission or brokerage" (as per 194H Explanation): Any payment received/directly/indirectly for services rendered in the course of buying/selling goods, transactions relating to any asset, valuable article, or thing, excluding insurance commission. * Threshold Limit: No TDS is required if the sum, or aggregate of sums, paid to a resident during the financial year does not exceed Rs. 50,00,000. This is a significant threshold, ensuring that only high-value transactions are covered, thus balancing compliance burden with revenue interests. * Rate: The TDS rate is 2% of the sum paid or credited. * Timing: TDS is to be deducted at the time of credit or payment, whichever is earlier. 3. Procedural Aspects and Compliance * Exemption from Main TDS Provisions: The provision applies only if the payer is not otherwise liable to deduct tax under the main TDS sections (i.e., not in business/profession above prescribed turnover, not a company/firm, etc.). This ensures that there is no overlap or double deduction. * Aggregation: The threshold applies on an aggregate basis for payments to each payee during the financial year, requiring payers to monitor cumulati....
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....HUFs: The provision brings high-value, non-business payments by individuals/HUFs within the TDS net, requiring them to monitor payments, deduct tax, deposit it with the government, and comply with reporting requirements. While the high threshold of Rs. 50 lakh limits the scope to significant transactions (such as construction contracts, large professional fees, property renovations, etc.), it does impose compliance on non-business taxpayers who may not be familiar with TDS processes. * For Recipients (Contractors, Professionals, Agents): The provision ensures greater reporting and traceability of high-value income, reducing the scope for tax evasion. However, it may also lead to cash flow issues if TDS is not appropriately credited, and require recipients to reconcile TDS credits in their tax returns. * For Tax Authorities: The provision enhances the ability to track high-value transactions and widen the tax base, but also necessitates clear administrative guidance to address ambiguities and ensure smooth compliance by non-business payers. * Compliance Requirements: While procedural relaxations (such as exemption from TAN in Section 194M) reduce compliance burden, the need to....
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....e Table (e.g., excluding those liable under 6(i), 6(iii), 1(ii)), while Section 194M refers to 194C, 194H, and 194J. The underlying intent is similar, but the drafting is adapted to the new structure. * Definitions: Section 194M explicitly adopts definitions from other sections, while the Bill relies on cross-references and may require reading definitions from elsewhere in the Bill or subordinate legislation. * Procedural Relaxations: Section 194M explicitly exempts payers from obtaining a TAN, easing compliance. The Bill's provision does not specify this, leaving the matter to rules or administrative instructions. If the exemption continues, it would be a significant relief for non-business payers. * Wording and Clarity: The Bill's provision is more concise and tabular, which aids in quick reference but may create interpretative challenges for complex cases. Section 194M's narrative format is more detailed. * Potential for Expansion: The Bill's tabular structure allows for easier modification, addition, or rationalization of TDS categories in the future, potentially increasing flexibility for policymakers. 4. Policy and Compliance Considerations * C....