In case you have made a payment towards a contractor or professional then you would be required to deduct tax at source at the rate of 5% if the aggregate payment goes beyond Rs 50 lakh in a fiscal year, according to the present income tax rules. The Central Board of Direct Taxes (CBDT) had recently notified rules relating to the time limit to deposit TDS with the central government as well as the time limit regarding the issuing the TDS certificate towards contractors or professionals.
As per the notification that has been issued by the CBDT on 18th November 2019, an individual is obligatory to deposit the tax deducted within 30 days from the end of the month in which the deduction has been made. The tax should be deposited together with a challan-cum-statement in Form 26QD.
Moreover, the individual would be required towards issuing the TDS certificate in Form 16D to the contractor or professional in 15 days from the due date of depositing tax. It has been held that if the payment was being made by the Individual or HUF for the carrying out any work or for implementation of the contract or payment in the nature of commission or brokerage or professional charges. Though, no TDS shall be deducted if the aggregate sum of payment doesn’t go beyond Rs 50 lakh in the fiscal year. TDS must be deducted at the time of payment or credit in the book of accounts, whichever is earlier. A challan-cum-statement in Form 26QD is required to be filed electronically through the deductor. The deductor would also require issuing the TDS certificate in Form 16D towards the professional or contractor.
With effect from 1st September 2019, it has become compulsory for an individual or Hindu Undivided Family (HUF) towards deducting tax on payments which was made to a contractor, professional, or commission or brokerage paid, totalling above Rs 50 lakh in a fiscal year.
In the same notification, CBDT had introduced the rules relating to section 194N of the Income Tax Act. As per section 194N, banks are required to deduct tax if money withdrawal from a bank account goes beyond Rs 1 crore in a fiscal year.
However TDS is deducted according to the clauses of Section 194N, certificate of TDS, that is, Form 16A would be issued through the deductor (bank) towards the deductee (individual). According to the provisions of Section 194N, TDS @ of 2 per cent would be applicable if money is withdrawn more than Rs 1 crore during the fiscal year.
What is Section 194M?
At the time of the Union Budget 2019, the Government had suggested some changes towards sections of the Income Tax Act. Aside from that, the Budget also presented a new Section for TDS that is 194M, which is for TDS on payment towards resident contractors and professionals. According to Sec 194M:-
• Every individual and/or HUF shall be required to deduct tax at source with regard to payment to resident contractors and professionals.
• For such individuals as well as HUF, tax audited is compulsory only if aggregate turnover or gross receipts go beyond Rs 1 crore or and the receipts of a profession go beyond Rs 50 lakh.
• This section is applicable in case the total sum paid to resident contractor or professional, for carrying out any contract work or furnishing a professional service, which is more than Rs 50 lakh.
• This section just covers the payments made towards resident contractor or professional, as well as non-residents are not included.
However relating to this, such individuals and HUF is required to file new TDS returns Form 26QD and Form 16D.
What is Form 26QD?
Form 26QD is a form required for TDS return filing for the payments towards resident contractors as well as professionals under Section 194M. According to CBDT notification, hereafter any tax deducted at source under Section 194M should be paid towards the Central Government in the period of 30 days from the end of the month while such deduction has been made. This deduction should be stated in a challan-cum-statement in Form 26QD.
What is Form 16D?
Form 16D is basically the TDS certificate required for TDS payment under Section 194M. According to CBDT notification, hereafter all individuals who have to deduct tax under Section 194M have to provide a TDS certificate, in the Form 16D towards the payee, in 15 days from the due date for TDS return filing in Form 26QD.
Therefore, the taxpayers are required to provide the aforesaid New TDS return filing forms.
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