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In Budget 2019, some important changes were made to income tax rules, including updates to existing sections and the introduction of new TDS provisions. Two key additions were:
Section 194M – TDS will be deducted when making payments to resident contractors and professionals. Scroll down to learn more.
Section 194N – If you withdraw more than ₹1 crore in cash, TDS will apply.
The Union Budget 2025 has brought good news for taxpayers, especially middle-income earners! To reduce tax deduction hassles and simplify compliance, the government has raised the threshold limits for TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) under various sections. This means fewer deductions and a smoother process for businesses and individuals.
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| Section | Current Limit | New Limit (Proposed) |
|---|---|---|
| 193 – Interest on securities | NIL | ₹10,000 |
| 194A – Interest (other than securities) | (i) ₹50,000 for senior citizens (ii) ₹40,000 for others (if paid by banks, co-op societies, post office) (iii) ₹5,000 in other cases | (i) ₹1,00,000 for senior citizens (ii) ₹50,000 for others (if paid by banks, co-op societies, post office) (iii) ₹10,000 in other cases |
| 194 – Dividend for individual shareholders | ₹5,000 | ₹10,000 |
| 194K – Income from mutual fund units | ₹5,000 | ₹10,000 |
| 194B & 194BB – Lottery, crossword winnings & horse race winnings | ₹10,000 (aggregate in a financial year) | ₹10,000 per transaction |
| 194D – Insurance commission | ₹15,000 | ₹20,000 |
| 194G – Commission/prize on lottery tickets | ₹15,000 | ₹20,000 |
| 194H – Commission or brokerage | ₹15,000 | ₹20,000 |
| 194-I – Rent | ₹2,40,000 (per year) | ₹6,00,000 (per year) |
| 194J – Fees for professional/technical services | ₹30,000 | ₹50,000 |
| 194LA – Compensation on land acquisition | ₹2,50,000 | ₹5,00,000 |
| 206C(1G) – Remittance under LRS & overseas tour package | ₹7,00,000 | ₹10,00,000 |
No TCS on Education Loans: If you’re sending money abroad for education and using a loan from a recognized financial institution (Section 80E), TCS (Tax Collected at Source) will not be applied.
TCS on Goods Purchase Removed: From April 1, 2025, TCS on buying goods will no longer be applicable.
Higher TDS Only Without PAN: The higher TDS rate will only be charged if you don’t provide your PAN.
These changes are aimed at making tax compliance simpler and more taxpayer-friendly!
Usually, individuals and Hindu Undivided Families (HUFs) need to deduct TDS (Tax Deducted at Source) only if they are running a business or profession with total earnings above:
• ₹1 crore (for businesses)
• ₹50 lakhs (for professionals)
However, Section 194M is an exception. Even if you don’t meet the above criteria, you still have to deduct TDS if you pay more than ₹50 lakhs in a financial year to a resident individual for:
• Contractual work
• Commission or brokerage (excluding insurance commission)
• Professional services
If your business earnings cross ₹1 crore or professional income exceeds ₹50 lakhs, TDS is deducted under Sections 194C, 194H, or 194J instead of 194M.
But if you don’t qualify under those sections, then Section 194M applies—ensuring TDS is still deducted.
Individuals or HUFs making payments above ₹50 lakhs for the services mentioned.
No need for a TAN (Tax Deduction Account Number)—you can deposit TDS using just your PAN.
The government introduced Section 194M in the Finance Bill of 2019 to ensure TDS (Tax Deducted at Source) is applied to payments made by individuals and Hindu Undivided Families (HUFs) to resident contractors or professionals—even for personal work.
Before this section came into effect:
✅ Individuals and HUFs were not required to deduct TDS on payments for personal use.
✅ Even businesses and professionals with income below the TDS threshold weren’t deducting TDS, even when payments were business-related.
✅ Large payments for contractual work, commissions (excluding insurance commission), and professional services were escaping TDS, leading to possible tax evasion.
📌 Applies to both personal and business-related payments.
📌 Only applies to resident individuals (not applicable for non-residents).
📌 Lower TDS certificates can be submitted under this section.
📌 No need for TAN (Tax Deduction Account Number). You can deposit TDS using PAN.
📌 Effective from 1st September 2019.
This section helps bring more transactions under TDS compliance and ensures fair tax collection.
Understanding these terms is important to know when TDS applies under Section 194M. Here’s what they mean:
In this section, ‘work’ includes:
✔️ Advertising
✔️ Broadcasting & telecasting, including producing programs for TV or radio
✔️ Transporting goods or passengers, except by railways
✔️ Catering services
✔️ Manufacturing or supplying a product as per a customer’s specifications, only if the customer provides the materials.
❌ If materials are bought from someone else, it is not considered “work” under this section.
Professional services include:
✔️ Legal services (lawyers, legal advisors)
✔️ Medical services (doctors, healthcare professionals)
✔️ Engineering services
✔️ Architectural services (architects, planners)
✔️ Accountancy services (CAs, auditors)
✔️ Technical consultancy (advisory on technical matters)
✔️ Interior decoration (home and office designing)
✔️ Any other service notified by the government
A contract also includes a sub-contract, meaning that TDS applies not just to direct agreements but also to outsourced work under a main contract.
This section ensures that TDS is deducted on payments made for various types of work, contracts, and professional services, making tax compliance smoother.
If you are an individual or HUF (Hindu Undivided Family) and you make payments to a resident for:
✔️ Contract work (including supply of labor)
✔️ Commission or brokerage (except insurance commission)
✔️ Professional services (like legal, medical, accountancy, etc.)
And if the total payment in a financial year exceeds ₹50,00,000, then you must deduct TDS under Section 194M.
🔹 Current Rate: 5%
🔹 New Rate (Effective from 1st October 2024): 2%
Section 194M has been in effect since September 1, 2019.
✅ If a payment crosses ₹50,00,000 after this date, TDS must be deducted—even if the contract started earlier.
This rule helps prevent tax evasion and ensures fair tax compliance on high-value payments.
TDS Deduction Timing Under Section 194M
TDS should be deducted at the earliest of the following events:
✔ When the amount is credited (recorded in accounts)
✔ When the payment is made (whether by cash, cheque, or draft)
🔹 TDS Rate: 5% (if the total payment to a resident crosses ₹50,00,000 in a financial year)
🔹 No PAN Provided? TDS jumps to 20%
Due Date for Depositing TDS
You need to file Form 26QD within 30 days from the end of the month in which you made the payment.
📌 Example: If you paid on 1st December 2023, the TDS must be deposited by 30th January 2024.
TDS Certificate (Form 16D)
After deducting TDS, you must provide Form 16D (TDS certificate) to the payee within 15 days of filing Form 26QD.
This ensures compliance and smooth tax filing!
If you deduct TDS under Section 194M, you don’t need to get a Tax Deduction Account Number (TAN). The usual rule under Section 203A, which requires TAN for TDS deductions, does not apply in this case.
Section 194M ensures that high-value payments to resident contractors and professionals are subject to TDS, preventing tax evasion. With the Budget 2025 updates, taxpayers benefit from increased TDS thresholds, simplifying compliance. Understanding the TDS rate chart and timely deductions helps avoid penalties under the Income Tax Act in India.
E Accountax Manager simplifies tax compliance for MSMEs and individuals, ensuring hassle-free TDS filing. Our expert guidance minimizes errors, prevents penalties, and keeps your business compliant. Stay updated with our expert insights—because your financial growth matters!
5% TDS is applicable if the payment exceeds ₹50 lakh in a financial year.
From 1st October 2024, the rate is proposed to be reduced to 2%.
If the recipient does not provide PAN, TDS will be deducted at 20%.
CA Jitendra Agarwal, a Chartered Accountant, is an experienced Income Tax Advisor with a proven track record in tax planning and compliance.
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