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 –

  • Fees for professional services;
  • Fees for technical services;
  • Royalty;
  • Remuneration / fees / commission paid to director of the company (excluding salary);
  • Fees paid for not carrying out any activity in relation to any business or profession;
  • Fees paid for not sharing any technical know-how, copyright, trade mark, patent or any other business or commercial rights of the same nature.

Understanding the meaning of important terms –

1. Professional Services –

The term ‘Professional Services’ means services rendered by a person carrying on –

    • Legal;
    • Medical;
    • Engineering or architectural profession or accountancy profession;
    • Technical consultancy or interior decoration or advertising;
    • or such other profession as notified by Board for the purpose of section 44AA.

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 –

  • Fees for professional services;
  • Fees for technical services;
  • Royalty;
  • Remuneration / fees / commission paid to director of the company (excluding salary);
  • Fees paid for not carrying out any activity in relation to any business or profession;
  • Fees paid for not sharing any technical know-how, copyright, trade mark, patent or any other business or commercial rights of alike nature.

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.

Also Read-

Particulars
TCS – Tax Collection at Source – A Complete Guide
TDS Rate Chart for Financial Year 2019-2020
Section 192 – TDS on Salary
Section 192A – TDS on Premature withdrawal from EPF
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

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9 Comments

  1. Sudhansu Das says:

    SIR I WANT TO KNOW THAT WHETHER GUEST FACULTY LECTURER, ,GUEST FACULTY RETD PROFESSOR,VISITING FACULTY LECTURER ARE UNDER U/S 194J CATEGORY

  2. AKHIL says:

    Is the hospitals are required to deduct TDS while releasing the salary payment to a doctor. His monthly salary is only 22000/-. What is the impact flood cess in this case ?

  3. GANDHI MOHAN BHARATI says:

    I certainly feel that time has arrived for the Finance Bill to introduce a new 194ZZZZZZZZZZZ to say any payment to anyone on any purpose will be liable for TDS at the rates to prescribed by CBDT from time to time and on such amounts as may be decided from time to time

  4. Gautam says:

    charges paid to an accountant ( Non-CA) for rendering accounting services Rs. 100000/-. whether ths will be covered u/s 194J or 194C.

    2. Profession includes vocation as per definition in Sec. 2. Please crearify.

  5. J.K. LAHOTI says:

    PLEASE CLARIFY LISTING FEES PAID BY COMPANIES TO STOCK EXCHANGE ARE LIABLE TO TAX DEDUCTION AT SOURCE U/S 194J OF I.T. ACT, 1961 OR ANY OTHER SECTION

  6. Bhagyashri Jadhav says:

    please suggest if tds deducted under section 194 J wrongly by deductor but assessee is appointed as a employee & assessee want to file his ITR salary head .

  7. RAHUL SINGH says:

    Sir,
    please clarify whether event management services are liable to tax deduction under section 194 c or 194 j of IT Act, 1961.

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