TDS on Contractor Payments — Section 194M (Form 26QD & 16D)

Section 194M — Income-tax Act, 1961
Inserted by Finance Act 2019, effective 1 September 2019. Applies to every individual or HUF (other than those required to deduct tax under Sections 194C, 194H, or 194J) who is responsible for paying to a resident any sum by way of fees for professional services, technical services, royalty, or sum paid to a contractor under a contract, where the aggregate of such sums exceeds ₹50 lakh in a financial year.

Rate: 5% — a single rate regardless of whether the payment is to a contractor (normally 1%/2% under 194C) or professional (normally 10% under 194J).

Rule 30(2)(BD) — due date for Form 26QD
TDS under Section 194M must be paid within 30 days from the end of the month in which deduction is made, via Form 26QD on the income tax e-filing portal. No TAN required — PAN suffices.

Section 203 / Rule 31 — Form 16D
TDS certificate to be issued to the payee within 15 days of the due date for filing Form 26QD.

Section 234E / Section 201(1A)
Same late-filing fee (₹200/day) and interest (1.5%/month) regime as other challan-cum-statement forms.

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ITA 2025 Concordance (in force 1 April 2026)
Section 194M [ITA 1961] → Section 393 [ITA 2025] (consolidated non-salary TDS provision; rate schedule covers contractor and professional payments)
Section 234E [ITA 1961] → Section 427 [ITA 2025]
Section 201(1A) [ITA 1961] → Section 397 [ITA 2025]
Transition note: AY 2026-27 runs under ITA 1961 per Section 536(2) repeal-and-savings. ITA 2025 sections apply to tax year 2026-27 onward.
Section 271H [ITA 1961] → Section 461 [ITA 2025] (Penalty for failure to furnish TDS/TCS statements — applies when Form 26QC/26QD not filed within 1 year of due date)

Section 194M (inserted by Finance Act 2019, effective 1 September 2019) fills a gap in the TDS framework: it requires individuals and HUFs not subject to tax audit under Section 44AB to deduct TDS when aggregate payments to contractors or professionals exceed ₹50 lakh in a financial year.

Who it applies to:

• Individuals and HUFs NOT required to get a tax audit (business turnover below ₹3 crore or professional receipts below ₹75 lakh)


• Paying to resident contractors (work contracts, labour contracts) under the scope of Section 194C


• Paying to resident professionals (doctors, lawyers, architects, engineers, CAs, consultants) under the scope of Section 194J

Who it does NOT apply to:

• Individuals/HUFs required to get tax audit under Section 44AB — they use the regular 194C/194J framework and must have TAN


• Payments to non-residents (covered by Section 195)

Key features — designed for ease:

• No TAN required: Section 194M uses PAN instead of TAN, making it accessible to individuals with no prior TDS obligations.


• Rate: 5% (flat rate for both contractors and professionals, unlike 1%/2% for contractors and 10% for professionals under 194C/194J)


• Form 26QD: challan-cum-statement (like 26QB and 26QC — no quarterly return)


• Due date: 30 days from end of the month in which TDS was deducted; March deductions due by 30 May


• Form 16D: TDS certificate generated from TRACES after 26QD is filed; given to the payee

Threshold is aggregate, not per-payment:
The ₹50 lakh threshold is the aggregate of all payments to contractors AND professionals during the financial year. ₹30 lakh to a contractor plus ₹25 lakh to a consultant = ₹55 lakh aggregate, crossing the threshold.