TDS Section 194J is getting attention again after Finance Bill 2020, which brings some revisions to Section 194J. The same will come into effect from 1/04/2020. TDS Section 194J of the Income Tax Act 1961 includes provisions regarding the TDS deduction of fees for technical as well as professional services.
We prepared this article to keep you up to date about the changes and to provide a complete overview of Section 194J under TDS. Here you will also get information about the applicability, rate of TDS under section 194J and a lot more.
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Amendments in TDS Section 194J Due to Finance Bill 2020
As per the Finance Bill 2020, some amendments have been made to Section 194J under TDS, the same will take effect from 1/04/2020. Now let’s take a look at amendments to Finance Bill 2020
- TDS will be deducted under Section 194J at a rate of 2% in case of fees for technical services (not being professional services) and the rate reaches up to 10% of such sum in any other case.
- Individual or HUF having a total sales, gross receipts or turnover from the business or profession carried on by him exceeding 1 crore rupee in case of business or Rs 50 lacs in case of the profession during the Financial year immediately preceding the FY in which such interest is credited or paid, shall be liable to deduct TDS. Monetary limits shall be substituted wherever Section 44AB has
Read Also: Section 194I, 194IB & 194IC for TDS Under Income Tax Act
After talking about the changes due to the Finance Bill 2020 let’s back to the basic structure of Section 194J Under TDS
Who is Liable to Deduct TDS Under Section 194J?
Everyone except an individual/HUF who is liable to make the following payments to any resident is liable to deduct TDS Under Section 194J:
- Fees for professional services and for technical services or
- Any remuneration/ fees/ commission whatever name called to a director of a company other than the payment on which tax is deductible u/s 192 or Royalty or
- Non-compete fees u/s 28(VA)
Note: It includes Individual/HUF falling under the scope of section 44AB.
Meaning of Professional Services Under Section 194J
- Professional Services are defined under Section 194J includes
- Medical
- Legal
- Engineering
- Architectural profession
- Accountancy
- Technical consultancy, or
- Interior decoration
- The profession of film artist
- The profession of the authorized representative
- The profession of Company Secretary
- Anchors
- Commentators
- Event Managers
- Physiotherapists
- Referees and Umpires
- Sports Persons
- Sports Columnists
- Trainers and Coaches
Read Also: A Brief Study of Newly Added TDS Section 194M
Meaning of Fees for Technical Services Under Section 194J:
Payment for the following services comes under the fees for technical services under section 194J:
- Technical services
- Managerial services
- Consultancy Services
- Provision of services of technical or other personnel
Rate of TDS Deduction Under Section 194J
The rates of TDS deduction under TDS Section 194J are given below in the table:
| Category | Rate |
|---|---|
| If Payee is engaged only in the business of the operation of the call centre | 2% |
| If payment is made for royalty for the sale, distribution, or screening of a film | 2% |
| If payment made for technical service | 2% |
| Payee involved in any other business operation or profession comes under the scope of194J | 10% |
| If PAN is not furnished by the payee | 20% |
Time of TDS Deduction Under Section 194J
Tax Deducted at Source (TDS) under Section 194J of the Income Tax will be deducted at the time of:
- The credit of the amount to the payee’s account
- Payment of such amount to the payee in cash/ cheque/ draft or any other medium, whichever is earlier
It is to be noted that the term credit here has an interesting meaning where such amount is transferred to the Payee’s account (called suspense account or any other name) in the books of account of the person liable to make such payment shall be deemed to have been credited to the payee’s account and TDS shall be deducted accordingly.
The Threshold Section 194J Under TDS
Section 194J under TDS (Tax Deducted at Source) will be not deducted where the prescribed payment or credit does not exceed the prescribed threshold limit.
| Category | Threshold Limit |
|---|---|
| Fees for professional services | 30000 |
| Fees for technical services | 30000 |
| Royalty | 30000 |
| Non-compete fees | 30000 |
| Remuneration/ commission/fees payable to a director of a company | No such limit |
We would like to mention here that the limit is applied and varies for each of the above services in section 194J under TDS (Tax Deducted at Source). To understand it better we can take an example that if the payment amount to a person towards each of the above categories is less than Rs 30000 but exceeds Rs 30000 in aggregate then TDS is not to be deducted.
Conditions for Non-Applicability of TDS Section 194J
There are some cases where TDS Section 194J is not applicable, listed below:
- If the payment is made by an individual or HUF. But if the individual/ HUF falls under *44AB(a)/ 44AB(b)then the payment is liable to deduct TDS following Section 194J
- Further, an individual/HUF is not liable to pay TDS under section 194J if the payment is made or credited exclusively for personal purposes.
Notes: Section 44AB(a) is related to those Businesses whose Total turnover or gross receipts for an FY exceeds Rs. 1 crore, whereas Section 44AB(b) is related to those Professionals whose Total Gross Receipts for an FY surpasses Rs. 50 Lakhs.
Recommended: How New Income Tax Rules Will Affect the TDS You Pay on Services
General Queries on Section 194J Under TDS
Q.1 – Who will deduct TDS for services listed under Section 194J?
The Tax Deducted at Source or TDS liabilities arising from services under Section 194J for professional technical experts or consultants will be paid by the payer at the time of making payment for the respective services used. For example, if the payer has hired an engineer to avail his services, then, the payer is required to make the respective payments after deducting the TDS liability arising from it.
Q.2 – Should I deduct TDS if the consultancy services of a professional are availed for the personal use of payer before paying his fees?
No, the taxpayer is not obliged to deduct TDS for the services availed for personal use
Q.3 – Are there any tax exemptions for TDS under Section 194J?
The exemption under Section 194J can be availed by a payer if he pays the tax according to the TDS rate, regardless of the total amount payable. The maximum exemptions under such cases id INR 30,000
Q.4 – I do not have the PAN details of the payee. Should I still deduct TDS u/s 194J?
Absolutely. Moreover, you should do that without any hesitation as the rate of TDS for those individuals who have submitted their PAN is 10% but for those who have not, it is 20%. You should ask the professional to give the PAN details and if he refuses to do so just deduct the TDS at the rate of 20%
Q.5 – Will I be penalized for not paying TDS to the government?
Yes, after the collection of required TDS, the payer is required to submit the respective TDS to the government. If he fails to do so, he will have to face the consequences. The interest at the rate of 1.5% is applicable per month from the date of collection to the date of payment
