CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194M — Certain Payments by Individuals or Hindu Undivided Family (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Inserted by the Finance Act, 2019 (w.e.f. 1 September 2019); mechanical, gap-filling.
Finance Act, 2026: No amendment. (Rate reduced from 5% to 2% by the Finance (No.2) Act, 2024 w.e.f. 1 October 2024.)
Mechanism: An individual/HUF outside sections 194C/194H/194J, paying a resident over ₹50,00,000 a year for work, commission/brokerage or professional services, deducts tax (Form 26QD, no TAN).
Litigation profile: None. A recent, mechanical provision — the candour rule applies.
A. SECTION COMMENTARY
Section 194M, inserted by the Finance Act, 2019 with effect from 1 September 2019, requires an individual or Hindu undivided family (not being one required to deduct under section 194C, 194H or 194J — that is, those below the section 44AB / business-and-profession thresholds) to deduct tax where they pay a resident, in a financial year, more than ₹50,00,000 for contractual work, commission, brokerage or professional services. The rate was five per cent and was reduced to two per cent by the Finance (No.2) Act, 2024 with effect from 1 October 2024. Compliance is light — Form 26QD, no TAN.
The gap-filling design
Section 194M plugs the gap left by sections 194C/194H/194J, which exempt small individuals/HUF: a person not carrying on business above the audit threshold could pay large sums for construction, renovation, commissions or professional fees without any deduction. Section 194M brings such high-value personal/non-business payments within the net, while keeping the threshold high (₹50 lakh) so that ordinary household payments are untouched. It sits beside section 194-IB (rent by such persons) in the 'individual/HUF self-compliance' group.
Why authority is absent — candour
The provision is recent, mechanical and threshold-based; it has produced no body of judicial authority. In candour, it is applied from its plain terms read with the meaning of 'work'/'commission'/'professional services' borrowed from sections 194C/194H/194J, and with the general default provisions.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194M. (1) 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, 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 97-two per cent of such sum as income-tax thereon:
Provided that no such deduction under this section shall be made if such sum or, as the case may be, aggregate of such sums, credited or paid to a resident during a financial year does not exceed fifty lakh rupees.
(2) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.
Explanation.—For the purposes of this section,—
(a) "contract" shall have the meaning assigned to it in clause (iii) of the Explanation to section 194C;
(b) "commission or brokerage" shall have the meaning assigned to it in clause (i) of the Explanation to section 194H;
(c) "professional services" shall have the meaning assigned to it in clause (a) of the Explanation to section 194J;
(d) "work" shall have the meaning assigned to it in clause (iv) of the Explanation to section 194C.
C. AUTHORITIES
Candour rule strictly observed: section 194M is a recent, mechanical gap-filling provision with no judicial authority. The statutory scheme and cognate meanings are offered.
Principle: 'Work', 'commission/brokerage' and 'professional/technical services' in section 194M carry the meanings developed under sections 194C, 194H and 194J respectively; section 194M differs only in the payer (small individual/HUF), the high ₹50 lakh threshold and the light compliance (Form 26QD).
Use: Imports the mature characterisation learning of the parent sections into section 194M.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194M.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194M — Certain Payments by Individuals or Hindu Undivided Family (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Inserted by the Finance Act, 2019 (w.e.f. 1 September 2019); mechanical, gap-filling.
Finance Act, 2026: No amendment. (Rate reduced from 5% to 2% by the Finance (No.2) Act, 2024 w.e.f. 1 October 2024.)
Mechanism: An individual/HUF outside sections 194C/194H/194J, paying a resident over ₹50,00,000 a year for work, commission/brokerage or professional services, deducts tax (Form 26QD, no TAN).
Litigation profile: None. A recent, mechanical provision — the candour rule applies.
A. SECTION COMMENTARY
Section 194M, inserted by the Finance Act, 2019 with effect from 1 September 2019, requires an individual or Hindu undivided family (not being one required to deduct under section 194C, 194H or 194J — that is, those below the section 44AB / business-and-profession thresholds) to deduct tax where they pay a resident, in a financial year, more than ₹50,00,000 for contractual work, commission, brokerage or professional services. The rate was five per cent and was reduced to two per cent by the Finance (No.2) Act, 2024 with effect from 1 October 2024. Compliance is light — Form 26QD, no TAN.
The gap-filling design
Section 194M plugs the gap left by sections 194C/194H/194J, which exempt small individuals/HUF: a person not carrying on business above the audit threshold could pay large sums for construction, renovation, commissions or professional fees without any deduction. Section 194M brings such high-value personal/non-business payments within the net, while keeping the threshold high (₹50 lakh) so that ordinary household payments are untouched. It sits beside section 194-IB (rent by such persons) in the 'individual/HUF self-compliance' group.
Why authority is absent — candour
The provision is recent, mechanical and threshold-based; it has produced no body of judicial authority. In candour, it is applied from its plain terms read with the meaning of 'work'/'commission'/'professional services' borrowed from sections 194C/194H/194J, and with the general default provisions.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194M. (1) 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, 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 97-two per cent of such sum as income-tax thereon:
Provided that no such deduction under this section shall be made if such sum or, as the case may be, aggregate of such sums, credited or paid to a resident during a financial year does not exceed fifty lakh rupees.
(2) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.
Explanation.—For the purposes of this section,—
(a) "contract" shall have the meaning assigned to it in clause (iii) of the Explanation to section 194C;
(b) "commission or brokerage" shall have the meaning assigned to it in clause (i) of the Explanation to section 194H;
(c) "professional services" shall have the meaning assigned to it in clause (a) of the Explanation to section 194J;
(d) "work" shall have the meaning assigned to it in clause (iv) of the Explanation to section 194C.
C. AUTHORITIES
Candour rule strictly observed: section 194M is a recent, mechanical gap-filling provision with no judicial authority. The statutory scheme and cognate meanings are offered.
No direct authority — statutory backdrop
Borrowed meanings — sections 194C/194H/194J
Principle: 'Work', 'commission/brokerage' and 'professional/technical services' in section 194M carry the meanings developed under sections 194C, 194H and 194J respectively; section 194M differs only in the payer (small individual/HUF), the high ₹50 lakh threshold and the light compliance (Form 26QD).
Use: Imports the mature characterisation learning of the parent sections into section 194M.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194M.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.