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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TDS will be deducted under Section 194J at a rate of 2% in case of fees for technical services (not being professional services), and 10% in any other case.
An individual or HUF having a total sales, gross receipts or turnover from the business or profession carried on by him exceeding 1 crore rupees in case of business or Rs 50 lacs in case of the profession during the Financial year immediately preceding the FY in which such amount is credited or paid, shall be liable to deduct TDS.
Read Also: Section 194I, 194IB & 194IC for TDS Under Income Tax Act
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 is 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.
An individual or HUF is liable to deduct TDS under section 194J only where turnover exceeds one crore rupees in the case of a Business and fifty lakh rupees in the case of a profession.
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 the Payee is engaged only in the business of operating the call centre | 2% |
| If payment is made for royalties for the sale, distribution, or screening of a film | 2% |
| If payment is made for technical service | 2% |
| Payee involved in any other business operation or profession comes under the scope of 194J | 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 not be deducted where the prescribed payment or credit does not exceed the prescribed threshold limit.
| Category | Threshold Limit |
|---|---|
| Fees for professional services | 50000 |
| Fees for technical services | 50000 |
| Royalty | 50000 |
| Non-compete fees | 50000 |
| 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 50000 but exceeds Rs 50000 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 has a turnover exceeding Rs 1 crore in case of business and Rs 50 Lakhs in case of profession, 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.
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 50,000
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
Dear Sir,
I am working as a Freelance corporate Trainer. In FY 2021-2022 my gross receipts from my clients / vendors exceeded 20 Lakhs. Every month my vendors deducting 10% TDS and depositing the same with my TDS account.
When I am going for ITR-3 Filling, My regular auditor is saying as TDS amounts are getting deposited in my account under section 194JB (professional or technical services). So GST filling is applicable for me. But another tax consultant is saying it is not required to Get GST Number and I can proceed with IRT-3.
I am totally confused, Please guide me. Do I need to register for GST or not?
Thanks in advance
Dear sir, You need to get Registered under GST if your gross receipts (Turnover) exceeds Rs.20 lakhs (For other than North -Eastern States) and Rs.10 lakhs (For North -Eastern States)
Dear Sir,
Can you please let me know the TDS deduction rate for Google cloud service and Amazon web services
Our company uses these services for developing our apps. So we pay monthly subscription charges for Google and Amazon. Now i’m not sure how much TDS should be deducted. Please let me know the tds rate and section.
Thank you
TDS is required to be deducted at the rate of 10% U/s 194J
HI… we run an consultancy firm where we provide medical staff for our clients. Once we generate the invoice every month, there is tax deduction under 194J 10%. We too have to deduct 10% TDS tax on the salaries paid to our employees. Can’t my services be considered as contract as i supply doctors and nurses, and hence be deducted under 194C… instead of being deducted at 194F
Hi
1. I am a software engineer in a company, which pays me monthly after deducting tax.
2. I am also giving professional services to an institution as part time job which have deducted TDS@10%.
In form 26AS, TDS deducted from both are mentioned. I tried to file ITR and uploaded my company’s(1) form-16 and added income from profession(2) also, but now it shows tax liability. Why tax is being calculated on salary mentioned in second part when TDS is already calculated on it?
Hi Preeti,
Usually, there won’t be any Tax liability on your salary income as TDS would have been deducted by your employer.
However when you consider your professional income there are chances that you will get a tax liability.
the reason is very simple. TDS on Professional Charges are deducted at 10%. But when you club this income with your salary, Your personal tax rate will be more than 10 %
eg: Suppose your Salary is 10 Lakhs and your employer has deducted salary and there is no liability.
But If You have a professional income of 1 lakh on which Rs 10,000 TDS deducted the you will have a liability of Rs 20,000. The reason being once your Income crosses Rs 10 Lakhs your personal tax rate will be 30%. TDS is deducted only at 10%. therefore the difference 20% (30%-10%) you will have to pay.
Note: Example is based on old Tax regime
I work for a company supplying a teaching service across via the internet.
I do not live in India and Invoice them for my services – but they have deducted TDS @ 30% as if I was an employee.
This cannot be correct can it?
Your comments would be useful as I have to speak to their finance manager
thanks
Fees-tech services, call center, royalty for sale etc.2%TDS Deducted Under Section 194J(a)
tell me tds rate & u/s of laboratory technical service bill
yes