Insertion of new sections 194M and 194N.
46. After section 194LD of the Income-tax Act, the following sections shall be inserted with effect from the 1st day of September, 2019, namely:––
Payment of certain sums by certain individuals or Hindu undivided family.
‘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 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 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 five 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) “professional services” shall have the meaning assigned to it in clause (a) of the Explanation to section 194J;
(c) “work” shall have the meaning assigned to it in clause (iv) of the Explanation to section 194C.
Payment of certain amounts in cash.
194N. Every person, being,––
(i) a banking company to which the Banking Regulation Act, 1949 (10 of 1949.) applies (including any bank or banking institution referred to in section 51 of that Act);
(ii) a co-operative society engaged in carrying on the business of banking; or
(iii) a post office, who is responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year, to any person (herein referred to as the recipient) from an account maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to two per cent. of sum exceeding one crore rupees, as income-tax:
Provided that nothing contained in this sub-section shall apply to any payment made to,––
(i) the Government;
(ii) any banking company or co-operative society engaged in carrying on the business of banking or a post office;
(iii) any business correspondent of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the guidelines issued in this regard by the Reserve Bank of India under the Reserve Bank of India Act, 1934; (2 of 1934.)
(iv) any white label automated teller machine operator of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007; (51 of 2007.)
(v) such other person or class of persons, which the Central Government may, by notification in the Official Gazette, specify in consultation with the Reserve Bank of India.’.
Note:
While Passing the bill in the Loksabha as on 18-7-2019, the following amendments were made:
Clause 46
Amendments made:
Page 18, for lines 19 to 24, substitute--
“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 years, 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 five per cent of such sum as income-tax thereon:”. (18)
Page 18, for lines 33 to 36, substitute-
‘(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; (19)
Page 18, line 44, for “from an account”, substitute “from one or more accounts”. (20)
Thus, the amended provision will be:
Insertion of new sections 194M and 194N.
46. After section 194LD of the Income-tax Act, the following sections shall be inserted with effect from the 1st day of September, 2019, namely:––
Payment of certain sums by certain individuals or Hindu undivided family.
‘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 years, 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 five 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;
Payment of certain amounts in cash.
194N. Every person, being,––
(i) a banking company to which the Banking Regulation Act, 1949 (10 of 1949.) applies (including any bank or banking institution referred to in section 51 of that Act);
(ii) a co-operative society engaged in carrying on the business of banking; or
(iii) a post office,
who is responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year, to any person (herein referred to as the recipient) from one or more accounts maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to two per cent. of sum exceeding one crore rupees, as income-tax:
Provided that nothing contained in this sub-section shall apply to any payment made to,––
(i) the Government;
(ii) any banking company or co-operative society engaged in carrying on the business of banking or a post office;
(iii) any business correspondent of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the guidelines issued in this regard by the Reserve Bank of India under the Reserve Bank of India Act, 1934; (2 of 1934.)
(iv) any white label automated teller machine operator of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007; (51 of 2007.)
(v) such other person or class of persons, which the Central Government may, by notification in the Official Gazette, specify in consultation with the Reserve Bank of India.’.
Notes on Clauses:
Clause 46 of the Bill seeks to insert new sections 194M relating to payment of certain sums by certain individuals or Hindu undivided family and 194N relating to payment of certain amounts in cash in the Income-tax Act.
Sub-section (1) of the proposed new section 194M seeks to provide for levy of tax deduction at source at the rate of five per cent. on any sum, or aggregate of sums, paid by an individual or a Hindu undivided family (other than those who are required to deduct income-tax as per the provisions of section 194C or section 194J) to a resident for carrying out any work (including supply of labour for carrying out any work) or by way of fees for professional services at the time of credit to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
The proviso to the said sub-section provides that no incometax referred to in sub-section (1) shall be deducted, if such sum or aggregate of such sums paid to a resident does not exceed fifty lakh rupees during the financial year.
Sub-section (2) of the proposed new section 194M seeks to provide that the provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.
The Explanation to the proposed new section also defines the expressions “contract”, “professional services” and “work”.
The proposed new section 194N provides that a banking company or a co-operative society engaged in carrying on the business of banking or a post office, which is responsible for paying any sum or aggregate of sums, in excess of one crore rupees in cash during the previous year to any person (referred to as the recipient in the section) from an account maintained by the recipient with such banking company or co-operative society or post office shall, at the time of payment of such amount, deduct an amount equal to two per cent. of sum exceeding one crore rupees as income-tax.
The proviso to the said section provides that the provisions of the proposed new section shall not apply to any payment made to the Government, any banking company, co-operative society engaged in carrying on the business of banking, post office, business correspondent of a banking company or co-operative society, engaged in carrying the business of banking, any white label automated teller machine operator of a banking company or co-operative society engaged in carrying the business of banking, or such other persons or class of persons, which the Central Government may, specify by notification in consultation with the Reserve Bank of India,.
These amendments will take effect from 1st September, 2019.
