Section 194M - TDS by Individual/HUF (Non-Audit Cases)
# TDS by Individual/HUF on Contract/Commission/Professional Fees — Section 194M
## Purpose
Applies to individuals or HUFs not required to deduct TDS under sections 194C, 194H, or 194J (i.e., those not liable for tax audit — turnover below ₹ 1 crore / ₹ 50 lakh).
## When TDS Applies
When aggregate payments in the FY to a resident for:
Contract work,
Commission/brokerage (not insurance commission), or
Professional services
exceeds ₹ 50,00,000 during the financial year.
## Rate
2% (deduction at the time of credit or payment, whichever is earlier).
## Why Section 194M Exists
To plug the loophole where high-value personal payments by non-audit individuals/HUFs were escaping the TDS net (e.g., a wealthy individual paying ₹ 70 lakh to a contractor for a personal home).
Worked example
### Example 1
Example — Sundar HUF pays ₹ 55,000 to Dr. Srivatsan for surgery on a family member (personal purpose)
Section 194J not attracted (personal purpose). Section 194M would apply only if payment exceeds ₹ 50 lakh. Here payment is far below ₹ 50 lakh → No TDS under section 194M either.
⚠️ Common exam mistakes
Forgetting that section 194M is a backup for those NOT covered by 194C/194H/194J.
Applying ₹ 50 lakh threshold per category rather than as an aggregate of all three (contract + commission + professional fees).
Treating personal HUF/individual payments as automatically exempt — section 194M applies once ₹ 50 lakh is crossed.
Bare-Act text Section 194M · Income-tax Act, 1961 · click to expand
Section 194M - Any person, being an individual or a Hindu undivided family (other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H or section 194J) responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract or by way of commission (not being insurance commission referred to in section 194D) or brokerage or by way of fees for professional services during the financial year, shall, at the time of credit of such sum or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to two per cent of such sum as income-tax thereon.
Provided that no deduction shall be made if such sum or aggregate of such sums does not exceed fifty lakh rupees in a financial year.