The present article features the TDS provisions contained under section 194J of the Income Tax Act, 1961 relating to the TDS deduction on fees for professional or technical services.
Coverage of Section 194J of the Income Tax Act
Categories of the person covered under section 194J
Every person, except an individual or a HUF, making payment to a resident for notified services is covered under section 194J of the Income Tax Act.
However, it should be noted that, if the gross receipts or sales or turnover of the Individual or a HUF exceeds the monetary limit specified under section 44AB (a) or section 44AB (b), then, they would get covered under section 194J. In short, in case of an individual or a HUF, if they are liable to get their accounts audited, they are required to deduct TDS as per provisions of section 194J.
List of notified services
Every person making payment of the following notified services is required to deduct TDS under section 194J of the Income Tax Act, 1961 –
Understanding the meaning of important terms –
1. Professional Services –
The term ‘Professional Services’ means services rendered by a person carrying on –
2. Fees for technical services –
The meaning of the term ‘Fees for technical services’ is the same as that provided in Explanation 2 to section 9 (1) (vii).
‘Fees for technical services’ means any consideration for the rendering of any managerial, consultancy, or technical services. It includes the provision of services of technical or other personnel. The term ‘Fees for technical services’ doesn’t include consideration for any construction, mining, assembly or like project undertaken by the recipient or consideration chargeable under the head ‘salary’.
3. Royalty –
The meaning of the term ‘Fees for technical services’ is the same as that provided in Explanation 2 to section 9 (1) (vi).
Time of TDS deduction –
The person who is required to deduct TDS under section 194J shall deduct TDS either at the time of credit of sum to the account of the payee or at the time of payment in cash / cheque / draft or any other mode, whichever is earlier.
Rate of TDS deduction –
The Deductor is required to deduct TDS at the following prescribed rates under section 194J of the Income Tax Act, 1961 –
|Particulars||Rate of TDS|
|Cases, wherein, the payee is engaged in the business of the operation of Call Centre only (effective from 1st June 2017)||2%|
|Any other case||10%|
|In case the payee fails to furnish PAN||20%|
Threshold Exemption Limit –
TDS is not deductible in case the payment doesn’t exceed the prescribed threshold exemption limit. No TDS is to be deducted if the aggregate amount credited / paid during the financial year doesn’t exceed –
1. INR 30,000 in case of fees for professional services.
2. INR 30,000 in case of fees for technical services.
3. INR 30,000 in case of royalty.
4. INR 30,000 in case of fees paid for not carrying out any activity in relation to any business or profession.
5. INR 30,000 in case of fees paid for not sharing any technical know-how, copyright, trade mark, patent or any other business or commercial rights of alike nature
It should be noted that the threshold exemption limit is not available only in the case of remuneration / fees / commission paid to director of the company (excluding salary).
Frequently Asked Questions (FAQ) –
Q.1 What is section 194J?
Ans: As per provisions of section 194J of the Income Tax Act, 1961 requires every person to deduct TDS @ 10% on the following payment made to a resident person –
Q.2 How can I claim TDS under section 194J?
Ans: If the TDS is deducted under section 194J and total net income of the year is below the taxable income, then the payee can claim for refund of TDS so deducted under section 194J by the filing of an income tax return.
Q.3 Is TDS applicable on legal charges?
Ans: Yes, TDS is applicable on legal charges if the aggregate amount exceeds INR 30,000 during the financial year.
Q.4 What is the TDS rates for consultancy?
Ans: TDS rates of 10% for consultancy are prescribed under section 194J of the Income Tax Act, 1961.
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|Section 193: TDS on Interest on Securities|
|Section 194 – TDS on dividend|
|Section 194A: TDS on interest other than interest on securities|
|Section 194B and Section 194BB – TDS|
|Section 194C – TDS on Contractors|
|Section 194D – TDS on insurance commission|
|Section 194DA – TDS in respect of Life Insurance Policy|
|Section 194E – TDS on payment to Non-resident Sportsmen or Sports Association|
|TDS under Section 194EE and Section 194F|
|Section 194G TDS on Commission on Sale of Lottery Tickets|
|Section 194H – TDS on Commission or Brokerage|
|Section 194I of Income Tax Act, 1961 – TDS on Rent|
|Section 194IA TDS on transfer of immovable property|
|Section 194IB – TDS on Rent paid by Individual / HUF|
|Section 194LA: Payment of Compensation on acquisition of certain immovable property|
|TDS under Section 194LB, 194LBA, 194LBB and 194LBC|
|Section 194LC: TDS on income by way of interest from an Indian Company or a business trust|
|Section 194LD TDS on income by way of interest on certain bonds and Government Securities|
|Section 194N – TDS on Cash Withdrawals|
|Section 194M: TDS on Payment of certain sum by certain Individual / HUF|
|Section 195 TDS on payment of any other sum to a non-resident|