Changes in TDS provisions brought out in the Finance Bill 2019

 Changes in TDS provisions brought out in the Finance Bill 2019


The Union Budget 2019 introduced a few changes in the TDS norms which all businesses should know about. We have enlisted those major changes below:



1. Section 194M – TDS on payment exceeding Rs 50 lakhs to Contractor or Professional by Individual/HUF

194M provides for levy of TDS at the rate of 5% on the sum paid or credited in a year on account of contractual work (including supply of labour for carrying out any work) or professional fees by an individual or a HUF (other than those who are required to deduct income-tax as per the provisions of section 194C or section 194J), if aggregate of such sums exceeds Rs. 50 lakhs in a year.

Read More: Newly inserted Section 194M requires you to pay TDS to contractors & professionals

Applicable Date – 01/09/2019



2. Section 194N – TDS on Cash Withdrawal exceeding Rs 1 crore from banks or cooperative bank or post office

This Section was brought in to encourage a cashless economy. This is a new section.  This Section provides for   levy of TDS @ 2% on cash payments in excess of Rs. 1 crore in aggregate made during the year, by a banking company or co-operative bank or post office, to any person from an account maintained by the recipient. 

Central Government, by way of notification, would be empowered to grant Government organizations, banking companies, co-operative societies engaged in carrying on the business of banking, post office, banking correspondents and white label ATM operators, who are involved in the handling of substantial amounts of cash as a part of their business operation, an exemption from this.

Applicable Date – 01/09/2019



3.Section 194DA – TDS on sum received under life insurance policy

Under this Section, a person is obliged to deduct TDS, if it pays any sum to a resident under a life insurance policy which is not exempt under sec 10 (10D). At present, TDS is required to be deducted @ 1% on such sum at the time of payment. Several concerns have been expressed regarding deducting TDS on the gross amount received. It creates difficulties to assessee who otherwise has to pay tax on the net income (i.e. total sum received less amount of insurance premium paid). From the point of views of tax administration as well, it is preferable to deduct tax on net income so that the income as per TDS return of the deductor can be matched automatically with the return of income filed by the assessee. The person who is paying a sum to a resident under a life insurance policy is aware of the amount of insurance premium paid by the assessee. Hence, it is proposed to provide for tax deduction at source at the rate of five per cent. on income component of the sum paid by the person.

Applicable Date – 01/09/2019


4.Section 194IA – TDS on payment of transfer of immovable property

This Section relates to levy of TDS on transfer of certain immovable property other than agriculture land. Presently, the term “Consideration for Immovable Property” is not defined in the act for the purposes of this section. It is noted that in the transaction involving purchase of immovable property, there are other types of payments made besides the sales consideration and the buyer is contractually bound to make such payments to the builder/seller, either under the same agreement or under a different agreement. Some of such payments are those for rights to amenities like club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee etc. Through Budget 2019, the term “Consideration for Immovable Property” is proposed to be defined as to include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property.

Applicable Date – 01/09/2019


For all changes in the Union Budget, read Key Takeaways from Union Budget 2019 – What to Know






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