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A new section 194M is inserted in the Finance Bill 2019 in the Union Budget 2019 to avoid tax evasion. This section has been inserted in case of transaction of personal nature related to contractors and professionals. This section also seeks to avoid tax evasion in cases when business or profession payments are made by an individual or HUF to resident individuals. In this blog, we will discuss this newly introduction Section 194M in detail;
Discussions Made
Therefore to avoid tax evasion related to the above-mentioned transactions, this section has been introduced.
Work: The expression, “work” in this section would include:
Professional services: The phrase, professional services in this section would include:
Contract: This expression includes sub-contract.
TDS is required to be deducted earlier of:
As mentioned above, Tax will be deducted at the rate of 5% in case the payment in a financial year exceeds Rs 50 Lakhs.
In case NO PAN is provided by the deductee, rate of TDS will be 20%
The TDS is required to be paid:
Therefore with the insertion of Section 194M, an effort is made by the government to erase the scope of tax evasion. Transactions of personal nature related to contract or professional service will come under scanner now.
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