Section 194M is a provision of the Indian Income Tax Act, 1961 that requires individuals and Hindu Undivided Families (HUFs) — who are not subject to tax audit under Section 44AB — to deduct TDS at 5% on payments made to resident contractors, professionals, or commission agents exceeding ₹50 lakh in aggregate during a financial year. This provision was introduced by the Finance Act 2019 to close a compliance gap — prior to Section 194M, many high-value individual and HUF payments to contractors and professionals escaped TDS deduction because the TDS obligation under Section 194C and 194J applied only to businesses subject to tax audit. Under Section 194M, individuals and HUFs making large payments for personal or business purposes — such as substantial home renovation contracts, professional services, or commission payments — must deduct TDS of 5%, deposit it with the government using Form 26QD, and issue a TDS certificate to the payee within the specified timeline. For high-income Indian investors and HUFs managing real estate projects, significant home construction, or large professional service engagements — such as legal retainers, architectural fees, or consultancy payments — understanding Section 194M obligations is essential to avoid interest and penalties for TDS non-compliance, which are increasingly scrutinised in the income tax department's high-value transaction monitoring framework.
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