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.

Table of Content

Who is liable to deduct TDS u/s 194J?
Rates for TDS deduction under TDS Section 194J
When to deduct TDS under section 194J?
Threshold under TDS Section 194J
Conditions for non-applicability of TDS Section 194J

1. Who is liable to deduct TDS u/s 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.

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.