TDS on Cash Withdrawal, Payment, Rent, Property: Latest rules for income taxpayers – Explained

The Central Board of Direct Taxes (CBDT) has extended the due date of payment of tax deducted at source (TDS) under section 194M of the Income Tax Act vide circular no. 31/2019. The CBDT has extended the due date for payment of TDS under Section 194M during September 2019 and October 2019 from 31-10-2019 and 30-11-2019 respectively to 31-12-2019.

The due date for furnishing challan-cum-statement in Form 26QD for the same months has also been extended to December 31, 2019. The due date for furnishing certificate of deduction of tax in Form 16D has also been extended for tax deducted during September and October to 15th January 2020.

While the recent CBDT circular comes as a relief to some individuals and HUFs, for the common taxpayers, TDS is still tedious to comprehend. For the benefit of common taxpayers, CA Sameer Mittal, Managing Partner, Sameer Mittal & Associates LLP, explains everything that needs to be known about the tax deducted at source.

Mittal told FE Online, “Earlier the TDS was required to be deducted by the individuals and HUFs who were subject to tax audit on the contractual, professional and commission or brokerage payments under section 194C, 194J and 194H. Now the TDS has to be deducted by individuals and HUFs who are not subject to tax audit.”

For a better understanding, the applicability of TDS rules for payments made by Individuals in two parts: 

  • Payments made by Individuals whose books are not required to be audited under section 44AB
  • Payments made by Individuals whose books are required to be audited under section 44AB

In the following paragraphs, Mittal has explained various TDS rules every taxpayer should know: 

Section 194IA

Any person, when purchasing an immovable property (i.e. a building or part of a building or any land other than agricultural land) for a consideration exceeding Rs 50 lakhs, has to deduct tax @ 1% at source (TDS) on the total sale consideration. It should be noted that if the payment is being made on instalment basis, then the deduction shall be made on each instalment. Further now, the ambit of sale consideration includes all the incidental charges in the form of parking fees, maintenance charges etc. The payment of TDS herein can be made using one’s PAN through form 26QB and the requirement of TAN will not be there. 

Section 194 IB

As per Section 194IB, it is compulsory for every individual/HUF who is making the rent payment exceeding 50,000/- per month to deduct TDS @ 5% even if the same individual is not required to get his books audited under section 44ab of income tax act 1961. For deducting and depositing TDS under this section Individual/HUF is not required to apply for TAN. Rent means a payment made by the lessee for leasing/renting Land, Land including a factory building, Machinery, Furniture, Equipment, Plant, Fitting etc. 

Section 194M

As per section 194M, any individual or a HUF, which is not subject to tax audit and is not required to deduct TDS under section 194C, section 194H or section 194J and is making payment to any resident for carrying out any work, commission, brokerage or fees for professional service shall deduct a sum equal to 5 per cent as TDS and deposit the amount with Government. The liability to deduct TDS will arise when the amount paid in the one go or in multiple instalments exceeds Rs 50 lakh. The TDS so deducted is required to be deposited within 30 days from the end of the month in which the deduction was made and shall be accompanied by a challan-cum-statement in form 26QD. Additionally, an individual is required to issue the TDS certificate to the deductee in Form 16D within 15 days from the due date for furnishing the challan-cum-statement in Form No.26QD.

Section 194 N

As per section 194N, TDS at the rate of 2 per cent will be deducted on the cash withdrawal exceeding Rs 1 crore from the banks, co-operative bank or post office. Mittal said, “Therefore one has to do planning before making the withdrawals of large sums of money from a bank.” 

Section 194 C

Under section 194C, an individual paying, any amount to the resident contractor or sub-contractor, is required to deduct TDS at the prescribed rates for any work relating to manufacture or supply of any good or product in accordance to the specifications and needs of a client, advertising, catering, production, telecast or broadcast of any programs, transport of goods, products and passengers through any means of transport with the exception of transport via rail etc. When provisions of section 194C of the Income Tax Act gets attracted, the Deductor is required to deduct TDS at 1 per cent if the payment is made to an individual or HUF and at 2 per cent in other cases. 

Section 194 H

In case an individual or HUF is subject to tax audit, he is required to deduct TDS under section 194H at the rate of 5 per cent for the payment being made to a resident in respect of commission or brokerage for the services rendered (except the professional services), service during the buying or selling of goods, in respect of any transaction relating to any asset, valuable article or thing. 

Section 194J

An Individual or HUF who is liable to tax audit during the financial year immediately preceding the financial year in which such sum is credited or paid, shall deduct tax under section 194J at the rate of 10 per cent on the following payments made to the resident individual- fees for professional services, or fees for technical services, or Director’s remuneration or fees or commission other than those covered under section 192, or Royalty, or Remuneration/fees/commission paid to director of the company (excluding salary); Fees paid for not carrying out any activity in relation to any business or profession; Fees paid for not sharing any technical know-how, copyright, trademark, patent or any other business or commercial rights of the same nature. The deduction is required to be made here if the payment amount exceeds Rs 30,000/. However, for the payment made to director no threshold limit is there. Also, the TDS rate might become 20 per cent in case of non-furnishing of PAN.


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