Compliances of TDS under section 194M

The Union Budget 2019 for the FY 2019-2020 presented on 5 July 2019, inter-alia, introduced section 194M of the Income Tax Act. This section mandates every Individual / HUF, who are making payment for the use of service of a contractor or a professional but not required to get their books of accounts audited, to deduct tax at source.

Intent behind introducing this section
Prior to the amendment an individual / HUF covered under section 44AB i.e. who are required to get their books of accounts audited and were making payment to a contractor or a professional were required to deduct TDS on the amount paid if such payment exceeds the specified statutory limit. But, with the applicability of this section the requirement of deducting TDS on payment made to a contractor or a professional has been imposed on individuals / HUF who are not required to get their books of accounts audited.

Applicability
Individuals / HUF making payment for the use of services by a contractor or a professional who are not required to get their books of accounts audited during the financial year i.e. their total turnover in case of business or gross receipts in case of profession does not exceed INR 1 crore and INR 50 lakhs respectively, and
When the total amount paid to a resident individual, for carrying out any contractual work or providing any professional service, in a financial year exceeds INR 50 lakhs.

Rate of TDS
Any individual  /HUF paying any sum to a resident, for carrying out any under any contract or by way of fees for professional services rendered during the financial year, exceeding INR 50 lakhs in a year will have to deduct TDS at 5%. In case PAN is not available of the deductee, TDS shall be deducted at the rate of 20% instead of 5%.

When can one deduct tax at source under 194M?
TDS amount will be deducted earlier of the following dates:

• At the time of credit of the amount; or
• At the time of payment by cash or by the issue of a cheque or draft.

Time limit of depositing TDS
The amount of TDS deducted shall be deposited to the credit of government within the time specified mentioned below:

• If the amount is deducted in the month of March then the same has to be deposited to the credit of government on or before April 30 of the next financial year.
• In any other month the amount has to be deposited to the credit of government within seven days from the end of the month in which the tax deduction is made.

If the amount of TDS is not deducted or the amount of TDS is deducted but not deposited to the credit of government then such deductor shall pay interest at the specified rates.

If you have question while making any payment to a contractor or professional regarding the applicability and implication of the section or require any assistance in complying with the TDS provisions, our team of experts can assist you.

CA in India |

Intimation under section 143(1)

Section 143(1) refers to the intimation order given by the Income Tax Department of India to the assessee against a return filed for any assessment year. In India, it is mandatory for individuals with a specified amount of annual income to file for an Income Tax Return within a specified time limit. Thus, it is necessary to understand what happens after the taxpayer has filed the return of income.

Income tax return is a form wherein taxpayer reports his gross taxable income obtained from various sources, his deductions and the net tax liability.

After the e-filing process has been completed by a taxpayer the Income Tax Department carries out a preliminary assessment of all the returns filed and informs taxpayers of the result of such preliminary assessment. This assessment primarily includes arithmetical errors, internal inconsistencies, tax computations and verification of tax payments. Such communication to the taxpayer post the preliminary assessment is called an intimation under section 143(1).

The assessee after filing the return of income receives intimation under section 143(1) if the assessee has paid either more or less than the amount which he is actually liable to pay. If the payment made is less than the actual amount, the assessee is required to make the payment. In case payment made is more than the actual amount, the assessee will be informed about the refund amount in the intimation sent by the department.

The total income of the assessee shall be computed under this section after making the following adjustments to the total income in the return-

1. Any arithmetical error in the return.
2. Any incorrect claim which is apparent from any information in the return where incorrect claim means the following-

• of an item which is inconsistent with another entry of the same item in such return; or
• in respect of which information was required to be furnished to substantiate such entry; or
• in respect of deduction where such deduction exceeds specified statutory limit.

1. Disallowance of losses claimed if the return of the previous year for which set off of loss is claimed was furnished beyond the due date of filing u/s 139(1).
2. Disallowance of expenditure indicated in the audit report but not taken into account in computing the total income.
3. Disallowance of deduction under section 10AA, 80IA, 80IAB, 80IB, 80IC, 80ID or 80IE if the return has been filed after the due date u/s 139(1).
4. Addition of income appearing in Form 26AS, 16 or 16A which has not been included in computing the total income but this is applicable only for the A.Y. 2017–18.

Time limit for intimation u/s 143(1)
The intimation u/s 143(1) can be sent by the tax department to the assesse any time before the expiry of one year from the end of the financial year in which return was furnished i.e. the notice u/s 143 can be sent before the expiry of assessment year.

If a taxpayer does not receive an intimation within such period, it simply means that no adjustments are carried out to the return filed by the taxpayer and there is no change in tax liability / refund. The acknowledgement itself is deemed to be section 143(1) intimation.

Opportunity of being heard
An opportunity of being heard shall be provided to the assesse before making any adjustment to explain and rectify the same within 30 days of such intimation and response, if given, by the assessee shall be considered before making any adjustments. If no such response is received by the assessee within 30 days of issue of such intimation then the adjustments can be made without any opportunity of being heard.

If you have recently received an intimation from the tax department and require assistance in filing a revised return or rectification application or tax assessment, our team of experts can assist you.

We can also assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, and trademark registration, business structuring and advisory services. If you require any assistance in this regard, kindly click here