The Finance Ministry has recently notified that Form 26QD has to be used for TDS return and Form 16D for TDS certificate to comply with Section 194M and 194N of the Income Tax Act.
According to Section 194M, any individual or a HUF who is not subject to tax audit and is not required to deduct TDS under Section 194C, Section 194H, or Section 194J shall deduct a sum equal to 5 per cent as TDS. The deduction must be made while making payment to any resident for carrying out any work, commission, brokerage, or fees for professional service. Such a deduction must be deposited with the government, provided that the payment amount should exceed Rs 50 lakh in one go or multiple instalments.
The tax deducted will be deposited with the government within 30 days from the end of the month in which the amount was deducted. This deposit is to be made with a challan-cum-statement in Form 26QD. Thereafter, the individual will have to issue a TDS certificate within 15 days from the due date of furnishing Form 26QD to the deductee mentioned in Form16D.
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Prior to the notification, the TDS was only required to be deducted by the individuals and HUFs, subjected to the tax audit. But, the new notification states that the TDS has to be deducted by individuals and HUFs even if they are not subject to the tax audit.
Since the individuals and HUFs, who are not subjected to the tax audit, were not required to deduct TDS under Section 194M, a major amount of money was subject to tax evasion. The money paid by them to the contractors, professionals, and commission-earners were kept out of the purview of TDS. After this notification, the same has been brought under the TDS umbrella.
The individuals and HUFs, who were not required to deduct TDS, will be burdened with TDS compliances. They will have to deduct the TDS amount and deposit it to the government within the stipulated time, otherwise, they will have to pay late fees on the due amount.
For any clarifications/feedback on the topic, please contact the writer at komal.chawla@cleartax.in
I am an aspiring Chartered Accountant. I spend most of my free time dredging through the various Indian finance subreddits. I am a semi-professional bowler with a high strike rate every time there is a new tax reform!
