My client is an individual paying a contractor and also paying rent. He has no TAN. What does he deduct, and at what rate?
Two per cent under either section, for anything on or after 1 October 2024; five per cent before that. Section 194M applies to an individual or HUF not already covered by s.194C, s.194H or s.194J who pays a resident more than fifty lakh rupees in a financial year for contract work, commission or brokerage or professional fees. Section 194-IB applies to an individual or HUF outside the second proviso to s.194-I who pays a resident rent exceeding fifty thousand rupees for a month or part of a month. Neither section requires a TAN, because s.203A is disapplied in both.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-10-01, reported as Income-tax Act 1961, ss.194M and 194-IB; s.194M inserted by Act No. 23 of 2019 w.e.f. 1 September 2019 and s.194-IB inserted by Act No. 7 of 2017 w.e.f. 1 June 2017; rate in each substituted for 'five' by Act No. 15 of 2024 w.e.f. 1 October 2024. It bears on section 194M, section 194-IB, section 203A, section 194C, section 194H, section 194J, section 194-I, section 206AA of the Income Tax Act 1961, in TDS Defaults, House Property and How Tax Law Is Read matters.
These are the two provisions that catch people who have never had a TDS obligation in their lives — a homeowner paying a builder, a professional's family paying rent — and this library has carried nothing on either. Three points do the work. The rate was cut from five per cent to two per cent by Act No. 15 of 2024, the Finance (No. 2) Act 2024, with effect from 1 October 2024, so any note written before that is wrong for a current payment. Neither section needs a TAN, so the deduction is reported on a challan-cum-statement rather than through a quarterly return. And in s.194-IB the whole year's tax is deducted once, from the last month's rent, which is why sub-section (4) caps the deduction at that month's rent where s.206AA applies.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 194M, inserted by Act No. 23 of 2019 with effect from 1 September 2019, requires any person being an individual or Hindu undivided family, other than those who are required to deduct as per s.194C, s.194H or s.194J, who is responsible for paying any sum to any resident for carrying out any work including supply of labour in pursuance of a contract, by way of commission not being insurance commission referred to in s.194D or brokerage, or by way of fees for professional services during the financial year, to deduct at the time of credit or payment, whichever is earlier. The proviso excludes deduction where the sum, or the aggregate of such sums, credited or paid to a resident during a financial year does not exceed fifty lakh rupees. Sub-section (2) disapplies s.203A. The Explanation borrows the meanings of 'contract', 'commission or brokerage', 'professional services' and 'work' from the Explanations to ss.194C, 194H and 194J. Section 194-IB, inserted by Act No. 7 of 2017 with effect from 1 June 2017, requires an individual or Hindu undivided family, other than those referred to in the second proviso to s.194-I, responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, to deduct; sub-section (2) fixes the time of deduction at the credit of rent for the last month of the previous year, or the last month of the tenancy if the property is vacated during the year, or payment, whichever is earlier; sub-section (3) disapplies s.203A; and sub-section (4) provides that where tax is required to be deducted under s.206AA the deduction shall not exceed the amount of rent payable for that last month. The Explanation defines rent as any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both. The rate in each section was five per cent as enacted and was substituted by two per cent by Act No. 15 of 2024 with effect from 1 October 2024.
Not applicable — statutory provisions. The operative position is that from 1 October 2024 the rate under both s.194M and s.194-IB is two per cent, and for any earlier period it is five per cent. The thresholds are unchanged: fifty lakh rupees in aggregate in a financial year to one resident under s.194M, and fifty thousand rupees for a month or part of a month under s.194-IB. Neither section requires the deductor to obtain a tax deduction account number.
Not applicable — statutory provisions, and no decision on either section was retrieved. What follows is this library's reading of the statutory words as published by the department. The rate change is established by the footnote 'Sub. for "five" by Act No. 15 of 2024, w.e.f. 1-10-2024' printed against the rate in both sections on the current departmental pages, and by comparing those pages with the earlier year-stamped snapshots, which print 'five per cent' and carry no such footnote. Act No. 15 of 2024 is the Finance (No. 2) Act 2024.
deduct an amount equal to two per cent of such sum as income-tax thereon
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Handle my notice → Ask a CA on WhatsAppTwo per cent under either section, for anything on or after 1 October 2024; five per cent before that. Section 194M applies to an individual or HUF not already covered by s.194C, s.194H or s.194J who pays a resident more than fifty lakh rupees in a financial year for contract work, commission or brokerage or professional fees. Section 194-IB applies to an individual or HUF outside the second proviso to s.194-I who pays a resident rent exceeding fifty thousand rupees for a month or part of a month. Neither section requires a TAN, because s.203A is disapplied in both. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 194M, section 194-IB, section 203A, section 194C, section 194H, section 194J, section 194-I, section 206AA of the Income Tax Act 1961. It is reported as Income-tax Act 1961, ss.194M and 194-IB; s.194M inserted by Act No. 23 of 2019 w.e.f. 1 September 2019 and s.194-IB inserted by Act No. 7 of 2017 w.e.f. 1 June 2017; rate in each substituted for 'five' by Act No. 15 of 2024 w.e.f. 1 October 2024. These are the two provisions that catch people who have never had a TDS obligation in their lives — a homeowner paying a builder, a professional's family paying rent — and this library has carried nothing on either. Three points do the work. The rate was cut from five per cent to two per cent by Act No. 15 of 2024, the Finance (No. 2) Act 2024, with effect from 1 October 2024, so any note written before that is wrong for a current payment. Neither section needs a TAN, so the deduction is reported on a challan-cum-statement rather than through a quarterly return. And in s.194-IB the whole year's tax is deducted once, from the last month's rent, which is why sub-section (4) caps the deduction at that month's rent where s.206AA applies. If it applies to you, the first step is this: Date the payment first. Two per cent from 1 October 2024; five per cent for anything earlier. The threshold did not change.
Section 194M, inserted by Act No. 23 of 2019 with effect from 1 September 2019, requires any person being an individual or Hindu undivided family, other than those who are required to deduct as per s.194C, s.194H or s.194J, who is responsible for paying any sum to any resident for carrying out any work including supply of labour in pursuance of a contract, by way of commission not being insurance commission referred to in s.194D or brokerage, or by way of fees for professional services during the financial year, to deduct at the time of credit or payment, whichever is earlier. The proviso excludes deduction where the sum, or the aggregate of such sums, credited or paid to a resident during a financial year does not exceed fifty lakh rupees. Sub-section (2) disapplies s.203A. The Explanation borrows the meanings of 'contract', 'commission or brokerage', 'professional services' and 'work' from the Explanations to ss.194C, 194H and 194J. Section 194-IB, inserted by Act No. 7 of 2017 with effect from 1 June 2017, requires an individual or Hindu undivided family, other than those referred to in the second proviso to s.194-I, responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, to deduct; sub-section (2) fixes the time of deduction at the credit of rent for the last month of the previous year, or the last month of the tenancy if the property is vacated during the year, or payment, whichever is earlier; sub-section (3) disapplies s.203A; and sub-section (4) provides that where tax is required to be deducted under s.206AA the deduction shall not exceed the amount of rent payable for that last month. The Explanation defines rent as any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both. The rate in each section was five per cent as enacted and was substituted by two per cent by Act No. 15 of 2024 with effect from 1 October 2024. The matter was decided on 2024-10-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not applicable — statutory provisions. The operative position is that from 1 October 2024 the rate under both s.194M and s.194-IB is two per cent, and for any earlier period it is five per cent. The thresholds are unchanged: fifty lakh rupees in aggregate in a financial year to one resident under s.194M, and fifty thousand rupees for a month or part of a month under s.194-IB. Neither section requires the deductor to obtain a tax deduction account number.
Not applicable — statutory provisions, and no decision on either section was retrieved. What follows is this library's reading of the statutory words as published by the department. The rate change is established by the footnote 'Sub. for "five" by Act No. 15 of 2024, w.e.f. 1-10-2024' printed against the rate in both sections on the current departmental pages, and by comparing those pages with the earlier year-stamped snapshots, which print 'five per cent' and carry no such footnote. Act No. 15 of 2024 is the Finance (No. 2) Act 2024. In the words reproduced by the source cited on this page: "deduct an amount equal to two per cent of such sum as income-tax thereon"
It was decided by the CBDT Circulars & Instructions on 2024-10-01 and is reported as Income-tax Act 1961, ss.194M and 194-IB; s.194M inserted by Act No. 23 of 2019 w.e.f. 1 September 2019 and s.194-IB inserted by Act No. 7 of 2017 w.e.f. 1 June 2017; rate in each substituted for 'five' by Act No. 15 of 2024 w.e.f. 1 October 2024. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 194M, section 194-IB, section 203A, section 194C, section 194H, section 194J, section 194-I, section 206AA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Not applicable — statutory provisions. The operative position is that from 1 October 2024 the rate under both s.194M and s.194-IB is two per cent, and for any earlier period it is five per cent. The thresholds are unchanged: fifty lakh rupees in aggregate in a financial year to one resident under s.194M, and fifty thousand rupees for a month or part of a month under s.194-IB. Neither section requires the deductor to obtain a tax deduction account number. It arises in TDS Defaults, House Property and How Tax Law Is Read matters, on section 194M, section 194-IB, section 203A, section 194C, section 194H, section 194J, section 194-I, section 206AA of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For s.194M check that your client is not already required to deduct under s.194C, s.194H or s.194J — if he is, s.194M does not apply to him and the ordinary section does. For s.194M test the fifty lakh figure on the aggregate of such sums credited or paid to one resident during the financial year, not payment by payment. For s.194-IB test the fifty thousand rupee figure per month or part of a month, deduct once at the time of credit of rent for the last month of the previous year or the last month of the tenancy if the property is vacated during the year, and remember the cap in sub-section (4) where s.206AA applies for want of PAN. Do not apply for a TAN. Section 203A is expressly disapplied by s.194M(2) and s.194-IB(3); use the challan-cum-statement route — the department's own footnotes to these sections point to Form 26QD and Form 16D for s.194M and Form 26QC and Form 16C for s.194-IB. Note the reach of the definitions in s.194M: 'contract', 'commission or brokerage', 'professional services' and 'work' all take their meanings from the Explanations to ss.194C, 194H and 194J, so the case law on those words applies.
Validity check could not be completed. Validity check could not be completed in the sense that no decision on either section was located and none could therefore be checked. The statutory text itself was read on four current departmental pages, two for each section, with Year stamps of 2025 and 2026, and the rate and threshold agree across all four. I did not read the Finance (No. 2) Act 2024 in the e-Gazette; the attribution to Act No. 15 of 2024 with effect from 1 October 2024 comes from the department's own footnote. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry is statutory text, not a decision. It asserts no holding, no bench and no judge's words; the quoted string is statutory text. The date in the decided_on field, 1 October 2024, is the date from which the rate change operates and is NOT a decision date. The text was read on 8 September 2026 on the Income Tax Department's own section pages, and the 'Year:' stamp was checked on every one of them. For s.194M the current pages are /w/section-194m-7 (Year 2025) and /w/section-194m-8 (Year 2026); both print 'two per cent' with the footnote 'Sub. for "five" by Act No. 15 of 2024, w.e.f. 1-10-2024'. For s.194-IB the current pages are /w/section-194-ib-1 (Year 2025) and /w/section-194-ib-2 (Year 2026); both print 'two per cent' with the same footnote. A warning for a later editor: the unsuffixed URLs are stale snapshots and will give the wrong rate. /w/section-194m carries a Year 2020 stamp and /w/section-194ib a Year 2017 stamp, and both still print five per cent; so do /w/section-194m-1 (Year 2019 (No. 2)), -2 (Year 2021), -3 (Year 2022), -4 (Year 2023), -5 (Year 2024 (No. 1)) and /w/section-194-ib (Year 2021). The form references are taken from the departmental footnotes on the archived s.194M pages ('See rules 28, 30, 31, 31A and 37BA and Form Nos. 13, 16D, 26B, 26QD and 27A') and on the archived s.194-IB page ('See rules 30, 31, 31A & 37BA & Form Nos. 16C, 26B, 26QC and 27A'); those footnotes are rule and form cross-references rather than statutory text, and they were not found on the current pages, so they are reported as at those pages' vintage. One further point that a reader should notice: the Year 2021 text of s.194-IB(4) referred to 'section 206AA or section 206AB', while the Year 2025 and Year 2026 text refers only to s.206AA — a consequential change following the omission of s.206AB. Finally, no decision of any court or tribunal on either section was located; see NOTES-B60.md for the searches run. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Not applicable — statutory provisions. The operative position is that from 1 October 2024 the rate under both s.194M and s.194-IB is two per cent, and for any earlier period it is five per cent. The thresholds are unchanged: fifty lakh rupees in aggregate in a financial year to one resident under s.194M, and fifty thousand rupees for a month or part of a month under s.194-IB. Neither section requires the deductor to obtain a tax deduction account number.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
We sell prepaid SIMs and vouchers to distributors below list price. Is that margin commission under 194H?
I buy stamp papers from the government at a discount and resell them. Is that discount commission under 194H?
We paid stock exchange transaction charges without TDS. Are those fees for technical services under 194J?
I did not deduct TDS, but the person I paid has already paid tax on it. Can the department still recover it from me?