Section 194M TDS on Security Services RWA 2025 Guide

Section 194M: Is Your Residential Society Deducting Correct TDS on Security Services? (2025 Update)

Security is one of the largest expenses in managing a residential society (RWA). With the latest amendments to the Income Tax Act, compliance rules for societies have changed. If your society is making significant payments to a private security agency, it's essential to understand your responsibilities under Section 194M.

1. What is Section 194M? (As of 2025)

This section applies to individuals and residential societies (RWAs) that are not subject to tax audits. If you make a large payment to a contractor (such as a security agency), you must deduct tax at the time of payment and deposit it with the government treasury.

2. Liability Trigger: Limit of ₹50 lakh

The statutory responsibility to deduct TDS is triggered when the total payment made to a single security agency or contractor in a financial year exceeds ₹50 lakh.

Note: If the payment is less than ₹50 lakh, no TDS is required to be deducted.

3. New TDS Rate: Not 5%, Now Only 2%

The Government of India has reduced the rate of TDS under Section 194M with effect from October 1, 2024.

  • Current rate (AY 2025-26): TDS must be deducted at the rate of only 2% on the total payment.
  • Earlier rate: 5%
  • No PAN Case: If the security agency does not provide PAN, TDS must be deducted at 20%.

4. Example of Calculation (According to New Rules)

Suppose your society pays a total of ₹60 lakh to 'XYZ Security' over the year:

  • TDS rate: 2%
  • TDS amount: ₹1,20,000 (2% of ₹60,00,000)
  • Net payment to vendor: ₹58,80,000

5. Compliance Process

The process has been simplified for residential societies:

  • No TAN required: Taxes can be paid using the society's PAN.
  • Form 26QD: Must be submitted online within 30 days from the end of the month.
  • Form 16D: TDS certificate must be issued to the vendor for tax credit.

6. How to Avoid Heavy Fines?

  • Time Limit: Delay in depositing TDS may attract interest at 1.5% per month.
  • Audit Preparation: Keep payment receipts and Form 26QD copies safe.
  • Tax Audit Case: If society falls under tax audit (Section 44AB), Section 194C applies instead of 194M.

Conclusion

The 2% TDS deduction under the 2025 rules provides relief for residential societies, but it is still important to monitor the ₹50 lakh threshold carefully. Deducting and depositing TDS on time helps avoid penalties and ensures smooth financial compliance for RWAs.