TDS on Payments to Resident Contractors and Professionals

FAQ's / TDS on Payments to Resident Contractors and Professionals

General

As per Finance Bill of 2019, new section 194M has been introduced. As per the section, if the “'PAYMENTS TO RESIDENT CONTRACTORS AND PROFESSIONALS’ exceeding ₹ 50,00,000 during the year, the Payer / Deductor has to deduct tax at the rate of 5% from the sum payable to a resident Payee/Deductee.

The Payer/Deductor being an Individual or a HUF (not liable to audit u/s 44AB) would have to deduct the TDS and deposit the same in Government treasury.

Payer/Deductor is not required to procure Tax Deduction Account Number (TAN). The Payer/Deductor is required to quote his or her PAN and PAN of the Payee/Deductee.

The Payer/Deductor (deductor of tax) has to furnish information regarding the transaction, online on the TIN website i.e. www.tin-nsdl.com. After successfully providing details of transaction, Payer/Deductor can:

  • Either make the payment online (through e-tax payment option) immediately; Or
  • Make the payment on a subsequently date through e-tax payment option (Net-banking account/Debit Card of selected banks) or by visiting any of the authorized bank branches. However, such bank branches will make e-payment without digitization of any challan. The bank will get the challan details from the online form filled on TIN website (www.tin-nsdl.com)

If any problem is encountered at the NSDL e-Gov website while entering details in the online form, please report such error to TIN Call Center at 020 - 27218080 or write to us at (Please indicate the subject of the mail as Online Payment of Direct Tax_ TDS on PAYMENTS TO RESIDENT CONTRACTORS AND PROFESSIONALS.

Form 26QD is the challan-cum-statement for reporting the transactions liable to TDS on PAYMENTS TO RESIDENT CONTRACTORS AND PROFESSIONALS under section 194M of the Income-tax Act, 1961. It is an online form available on the TIN website.

The due date of payment of TDS on ‘PAYMENTS TO RESIDENT CONTRACTORS AND PROFESSIONALS’ is within a period of thirty days from the end of the month in which the payment has been made.

Example: If Date of Payment is September 1st, 2019, then due date for filing Form 26QD will be October 30, 2019’.

According to rule, Payer / Deductor should furnish challan-cum-statement in Form 26QD in following scenarios:-

  • At the end of ‘Financial Year’
  • At the end of ‘Termination of Contract/Services’
  • Both cases or at the time of Payment/Credit deductor/payer can file 26QD

Explanation: If Date of Payment is September 1st, 2019, then due date for filing Form 26QD will be October 30, 2019’.

  • Acknowledgment number for the Form 26QD furnished is available in the Form 26AS (Annual Tax Statement) of the Deductor (i.e. Payer/Deductor). The same can be viewed from the TRACES website (www.tdscpc.gov.in) or
  • Taxpayer can also click the option ‘View Acknowledgment’ hosted on the TIN website. Taxpayer needs to enter PAN of the Payer/Deductor and Payee/Deductee, Total Payment and Financial Year (as mentioned at the time of filing the Form 26QD) to retrieve the Acknowledgment Number.

The deductor may access the link “E-tax payment on subsequent date” on the TIN website. On entering the details as per the acknowledgment slip, deductor will be provided options to Print the Form 26QD.

Form 16D is the TDS certificate to be issued by the deductor to the deductee in respect of the tax deducted and deposited as TDS under section 194M of the Income-tax Act, 1961.

Form 16D will be available for download from the website of Centralized Processing Cell of TDS (CPC-TDS), www.tdscpc.gov.in

Payer/Deductor may approach any of the authorized Bank Branch to facilitate in making e-payment.

Provision to enter Tax amount (comprising of basic tax, interest and fee) in Form 26QD is given in TIN website and Bank's site.

As per section 234E of the Income-tax Act, 1961 read with Rule 31A (4B) of Income-tax Rules, 1962, failure on part of deductor (Payer/Deductor) to furnish challan-cum-statement in Form No. 26QD electronically within 30 days from the end of the month in which the tax deduction is made will attract levy of fee for default in furnishing statement at the rate of ₹200 for every day to be paid by the deductor (Payer/Deductor).

In case of unexpected error after generation of acknowledgement number, please do not fill the Form 26QD once again. You may access the link E-tax payment on subsequent date under Form 26QD on the TIN website. On entering the acknowledgement number which is already generated for Form 26QD, taxpayer will be provided with an option to submit to the bank for e-Payment wherein you have to select the Mode of Payment and Bank through which you desire to make the payment. You will be taken to the Net-Banking/Debit Card login screen wherein you can make the payment of taxes online.

In case of unexpected error after generation of acknowledgement number, please do not fill the Form 26QD once again. You may access the link E-tax payment on subsequent date under Form 26QD on the TIN website. On entering the details of the same Form 26QD and acknowledgement number which is already generated, you will be provided with an option to submit to the bank for e-Payment wherein you have to select the Mode of Payment and Bank through which you desire to make the payment. You will be taken to the Net-Banking/Debit Card login screen wherein you can make the payment online.

Payment through e-tax payment option immediately

To avail this facility the taxpayer is required to have a Net-banking/Debit card account with any of the Authorized Banks or a debit card in case of some banks. List of Authorized Banks is available at the TIN website.

TIN system will direct you to Net-banking/Debit card facility of your bank. You will have to log on to the Net banking site of your bank using your login ID and password/PIN provided by the bank. The particulars entered by you at TIN website will be displayed again.

You will now be required to enter the amount of tax you intend to pay and also select your bank account number from where you intend to pay the tax. After verifying the correctness, you can proceed with confirming the payment.

Your bank will process the transaction online by debiting the bank account indicated by you and generate a printable acknowledgment indicating the Challan Identification Number (CIN). You can verify the status of the challan in the "Challan Status Inquiry" at NSDL e-Gov-TIN website using CIN after a week, after making payment.

You will have to check the net-banking webpage of your bank’s website for this information.

Your Bank provides facility for re-generation of electronic challan counterfoil. Kindly check the Bank website, if not then you should contact your bank and request them for duplicate challan counterfoil.

If any problem encountered while entering the financial details at the net-banking webpage of your bank, then you should contact your bank for assistance.

Payment of tds subsequently

Using this facility deductor (Payer/Deductor) can furnish the details online and make the payment of taxes subsequently either through Net-banking/Debit card account or by visiting any of the authorized bank branches. Following are the steps to avail this facility

Step 1

  1. Log on to NSDL e-Gov -TIN website (www.tin-nsdl.com).
  2. Click on the option "Online form for furnishing TDS on ‘PAYMENTS TO RESIDENT CONTRACTORS AND PROFESSIONALS’ (Form 26QD)".
  3. Select Form 26QD (Payment of TDS on ‘PAYMENTS TO RESIDENT CONTRACTORS AND PROFESSIONALS’)

Step 2

After selecting the form you will be directed to the screen for entering certain information.

Example:-

    a) Permanent Account Number of the Payer/Deductor and Payee/Deductee
    b) Address of the Payer/Deductor and Payee/Deductee
    c) Financial Year will be populated on the basis of Date of Payment/Credit selected in the Form.
    d) Major Head Code - Indicates the type of tax applicable viz; Corporation Tax (Companies)/ Income Tax (Other than Companies) will be populated based on Payee/Deductee PAN
    e) Total Value of Contract
    f) Date of Payment/Credit
    g) Date of Payment/Credit
    h) Date of Deduction
    i) Amount Paid/Credited
    j) TDS Amount
    k) Select the option for "Payment of taxes immediately"

It is important to ensure that PAN of Payer/Deductor and Payee/Deductee are correctly mentioned in the form. There is no online mechanism for subsequent rectification. Deductor will have to approach the TDS - Assessing Officer or CPC-TDS for rectification of errors.

Step 3

After entering all the above detail, click on PROCEED button. The system will check the validity of PAN. In case PAN is not available in the database of the Income Tax Department then you cannot proceed with the payment of tax.

If PAN is available then TIN system will display the contents you have entered along with the "Name" masked as per in the ITD database with respect the PAN entered by you.

If PAN of the Payee/Deductee is not available, please select the option Permanent Account Number Not Available. In such case, TDS has to be deducted under the provisions of section 206AA of the Income-tax Act, 1961 i.e. at higher rate of 20%.

Step 4

You can now verify the details entered by you. In case you have made a mistake in data entry, click on “EDIT” to correct the same. If all the detail and name as per ITD is correct, click on “SUBMIT” button. Ten digit alpha numeric ACK no. will be generated and you will be directed to the net-banking site provided by you.

Please be informed that the Name as masked and Status of PAN is as per the ITD PAN Master. You are required to verify the name before making payment. In case any discrepancy is observed, please confirm the PAN entered by you. Any change required in the name displayed as per the PAN Master can be updated by filling up the relevant change request forms for PAN. If the name is correct, then click on "Confirm".

Step 5

With the printout of the Acknowledgment slip, you may visit any of the authorized Bank branches to make the payment of TDS subsequently. The Bank will make the payment through its Net banking/Debit facility and provide you the Challan counterfoil as acknowledgment for payment of taxes. Based on the information in the Acknowledgment slip, the bank will make the payment only through Net-banking/Debit card facility by visiting www.tin-nsdl.com and entering the acknowledgement number duly generated by TIN for the statement already filled by the buyer in respect of that transaction.

In case you desire to make the payment through e-tax payment (net banking account) subsequently, you may access the link “E-tax on subsequent date” on the TIN website. On entering the details as per the acknowledgment slip, you will be provided an option to submit to the bank wherein you have to select the Bank through which you desire to make the payment. You will be taken to the net banking login screen wherein you can make the payment online.