Section 194J – TDS on fees on professional or technical services


As per the Finance Bill 2020, the following amendments have been made in TDS Section 194J which will take effect from 1/04/2020. What is TDS Section 194J?

Section 194J of the Income Tax Act 1961 contains provisions with respect to TDS deduction on fees for professional or technical services.

  1. Who is liable to deduct TDS u/s 194J?

    Every person other than an individual/HUF who is liable to make the following payments to any resident is liable to deduct TDS u/s 194J:

    • Fees for professional services which includes
      • Medical, legal, engineering, or architectural profession, accountancy, technical consultancy, or interior decoration.
      • Professional services notified in section 44AA, The profession of film artist, The profession of authorized representative, The profession of Company Secretary
      • Professional Services rendered in relation to sports activities notified by CBDT for section 194J, Sports Persons, Referees and Umpires, Trainers and Coaches, Commentators, Anchors, Sports Columnists, Event Managers, Physiotherapists Managerial services - Consultancy Services - Provision of services of technical or other personnel or
    • Fees for technical services which includes Managerial services, Consultancy Services, Provision of services of technical or other personnel or
    • Any remuneration/fees/commission whatever name called to a director of a company other than the payment of salary
    • Royalty or
    • Individual/HUF falling under the scope of section 44AB are included.
  2. Rates for TDS deduction under TDS Section 194J

    TDS under section 194J is deducted at the following rates:

    • Payee engaged only in the business of the operation of call center - 2%
    • Payee engaged in any other business operation/profession covered under the scope of194J - 10%
    • If PAN not furnished by the payee - 20%
  3. When to deduct TDS under section 194J?

    TDS under Section 194J of the Income Tax is to be deducted at the time of:

    • Credit of such amount to the account of the payee or
    • Payment of such amount to the payee in cash/cheque/draft/any other mode, whichever is earlier.
  4. Threshold under TDS Section 194J

    In case the prescribed payment/credit exceeds the prescribed threshold limit.

    • Threshold Limit Fees for professional services - Rs 30000
    • Fees for technical services - Rs 30000
    • Royalty - Rs 30000
    • Non-compete fees - Rs 30000
    • Remuneration/commission/fees payable to a director of a company - No such limit
  5. Conditions for non-applicability of TDS Section 194J

    TDS Section 194J is not applicable in the following cases:

    - If the prescribed payment is made by an individual/HUF. However, if the payment is made by individual/HUF who falls under :-

    • 44AB(a)/44AB(b) is liable to deduct TDS under section 194J.
    • Section 44AB(a) includes those Businesses whose Total turnover or gross receipts for a financial year exceeds Rs. 1 crore
    • Section 44AB(b) includes those Professionals whose Total Gross Receipts for a financial year exceeds Rs. 50 Lakhs.
    • Further, an individual/HUF is not liable to pay TDS under section 194J if the payment is made or credited exclusively for personal purposes.

Amendment in Finance Bill 2020 in TDS Section 194J:

As per the Finance Bill 2020, the following amendments have been made in TDS Section 194J which will take effect from 1/04/2020:

-The rate at which TDS will be deducted under section 194J will be 2% in case of fees for technical services (not being professional services) and 10% of such sum in any other case.

- Individual/HUF, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed 1 crore rupee in case of business or Rs 50 lacs in case of the profession during the FY immediately preceding the FY in which such interest is credited or paid, shall be liable to deduct TDS.