In the latest 2019 Budget, significant modifications have been made to income tax laws, introducing new TDS sections such as 194M and 194N.

Understanding Section 194M is crucial. It mandates TDS deduction by individuals and HUFs not obligated to audit their accounts. This applies when a business's turnover exceeds Rs. 1 crore, or professional receipts surpass Rs. 50 lakh. It becomes relevant if payments for contractual work or professional services to a resident exceed Rs. 50 lakh in a fiscal year.

For individuals or HUFs engaged in audit-required activities, TDS is deducted under Sections 194C or 194J, rather than 194M. In such cases, using PAN suffices without necessitating a TAN for TDS.

It’s paramount to understand that Section 194M does not pertain to non-resident payments.

The enactment of Section 194M ensures TDS from payments by individuals/HUFs to resident contractors, especially for personal services, mitigating previous tax evasion.

Earlier, businesses or professions exempt from audits often bypassed TDS, resulting in significant contractual and professional payments escaping tax scrutiny.

Key terms in Section 194M include "work," covering advertising, broadcasting, transportation excluding railways, catering, and custom product manufacturing. "Professional services" encompass fees for professional/technical services, director payments (excluding salary), royalty, and non-compete agreements. "Contract" envelops sub-contracts as well.

The responsibility of TDS under Section 194M lies with individuals/HUFs paying for completed contractual or professional services. When payments surpass Rs. 50 lakh annually, a 5% TDS is necessary. However, the rate was adjusted to 3.75% from 14th May 2020 to 31st March 2021.

Effective from 1st September 2019, any amounts over Rs. 50 lakh paid afterwards—even for pre-existing contracts—require TDS deduction.

TDS must be deducted on the credit date or payment time, whichever precedes, whether in cash, cheque, or draft form.

The TDS rate under Section 194M remains 5%, reducing to 3.75% temporarily during specified dates.

In situations where the payee's PAN isn't available, a higher 20% TDS rate applies.

For TDS deposits, payments by or on the government's behalf obligate same-day government payment, and others use Form 26QD. April deposits for March deductions, and seven-day month-end deposit windows apply otherwise.

TDS certificates, furnished via Form No. 16D, are due to the payee within 15 days following the Form 26QD submission deadline.