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

Tax has to be deducted from fees paid for professional or technical services to any person who is a resident in India. TDS provisions related to fees for professional and technical services are specified in section 194J.

As per section 194J, tax has to be deducted from following payments;

  • Fees for professional services, or
  • Fees for technical services, or
  • Royalty, or
  • Any remuneration, fees or commission paid to directors of a company, or
  • Any sum received for not carrying out any activity or for not sharing any know-how or patents etc

Person responsible for deducting tax

Persons responsible for making above type of payments are required to deduct tax under section 194J.

However, if the person is an individual or HUF and not subject to tax audit under section 44AB(a) and 44AB(B) during the preceding financial year, TDS amount is not required to be deducted while making above payment’s.

Time of deduction and Rate of TDS

Tax has to be deducted at the rate of 10% from above type of expenses at the time of payment or credit whichever is earlier. This means if you have not paid but provisions are created at the end of the year, you are required to deduct tax at the time of credit to the books of accounts.

TDS as calculated under section 194J is required to be paid to tax department on or before 7th day of the following month in which tax has been deducted.

However, with effect from 1-6-2017, if payee being a person engaged only in the business of call center then the rate of TDS under section 194J is 2%.

When tax not to be deducted under section 194J

Tax should not be deducted when aggregate of payments does not exceed Rs. 30,000 in a financial year for each of the following nature of payments;

  • Fees for professional services, or
  • Fees for technical services, or
  • Royalty, or
  • Any sum received for not carrying out any activity or for not sharing any know-how or patents etc

This means in above type of expenses, tax has to be deducted only when aggregate payments to a person for each nature of expenses exceeded Rs. 30,000 during the financial year.

There is no threshold limit in the case of remuneration, fees or commission paid to directors of a company. This means TDS amount has to be deducted from remuneration, fees or commission paid to directors irrespective of the amount paid.

No tax has to be deducted under Section 194J, If the sum paid by an individual or HUF is towards professional services exclusively for their personal use.

When expenses are included in an invoice along with the fees of Professional services, tax has to be deducted on the gross amount of the bill including claim of reimbursement of actual expenditure.

Meaning of Professional services for tax deduction u/s 194J

Professional services for the purpose of section 194J means following services;

  • Legal
  • Medical
  • Engineering
  • Accountancy
  • Architectural
  • Technical consultancy
  • Interior decoration
  • Advertising
  • Profession as notified for the purpose of section 44AA
  • Services rendered in relation to sports activities by a sports person
  • Umpires and referee
  • Coaches and trainer
  • Team physician and physiotherapist
  • Event managers
  • Commentators
  • Anchors
  • Sports columnist

Meaning of technical services for TDS U/s 194J

Fees for technical services means any consideration received for rendering following services;

  • Managerial
  • Technical
  • Consultancy
  • Provision of services for technical or other personal

However, consideration for any construction, assembly, mining or like project is excluded from the definition of technical services. Even consideration chargeable under the head salaries are also excluded from the definition of technical services.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.