The Budget for Financial year 2020-21 has been approved by the Hon’ble President and as such the following provision has been brought vide the aforesaid Finance Act :
“In section 194J of the Income-tax Act, in sub-section (1),–– (a) in the long line, for the words “ten per cent. of such sum”, the words and brackets “two per cent. of such sum in case of fees for technical services (not being a professional services, or royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films and ten per cent. of such sum in other cases,” shall be substituted;”
Accordingly the 2% rate has been extended to the payment of royalty related to sale, distribution or exhibition of cinematographic films.
Keeping in light all the aforesaid facts , we would like to highlight certain analysis to provide the true picture of the aforesaid amendment.
1. As per Budget 2020, TDS under section 194J at the rate of 10% is applicable on the professional Charges , royalty, remuneration or fees to director, fees for not carrying out any work, fees for not sharing any know how or patent or copyright and in case of Technical Charges, TDS is applicable at the rate of 2% under section 194J of the Income Tax Act, 1961.
2.As per Explanation b to section 194J, fees for technical service shall have the same meaning as in Explanation 2 to Section 9(1)(vii), where ‘fees for technical services’ has been defined and it means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.
3. As per Explanation ato section 194J , “professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section;
4. As per Rule 6F of Income Tax Rules read with section 44AA of the Income Tax Act, the list of other professionals include authorised representative or film artist . “Authorised Representative” means a person who represents any other person, on payment of any fee or remuneration before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy.
5.Film artist” means any person engaged in his professional capacity in the production of a cinematograph film whether produced by him or by any other person, as—
(i) an actor;
(ii) a cameraman;
(iii) a director, including an assistant director;
(iv) a music director, including an assistant music director;
(v) an art director, including an assistant art director;
(vi) a dance director, including an assistant dance director;
(vii) an editor;
(viii) a singer;
(ix) a lyricist;
(x) a story writer;
(xi) a screen-play writer;
(xii) a dialogue writer; and
(xiii) a dress designer.
Consolidated list of Vendors to be considered as Professional:
(i)Actor
(ii) a cameraman;
(iii) a director, including an assistant director;
(iv) a music director, including an assistant music director;
(v) an art director, including an assistant art director;
(vi) a dance director, including an assistant dance director;
(vii) an editor;
(viii) a singer;
(ix) a lyricist;
(x) a story writer;
(xi) a screen-play writer;
(xii) a dialogue writer; and
(xiii) a dress designer.
(xiv) Authorised Representative
(xv)Lawyer
(xvi) Engineer
(xvii) Accountant
(xviii) Architectural Profession
(xix) interior Decorator
(xx) Medical Professional
(xxi) Technical Consultant
(xxii) Payment made relating to advertisement designing
Now that we have explained the relevant terms per se “Professional” and “Technical”, we would like to highlight the fact that there is a sense of homogeneity in the definition of Technical and Professional services and as such there is a need of certain clarification from the end of Income Tax Department as to what clearly constitutes as technical service and professional service so that a correct and compliant procedure is followed to avoid any litigation in future.
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