As per section 194J of Income tax act 1961, a person is required to deduct TDS @ 10% on following payments paid to a resident in excess of Rs. 30,000 during a financial year;
- Fees for professional services; or
- Fees for technical services; or
- Royalty; or
- Non-compete fee as referred under section 28(VA) of income tax act.
Threshold limit of Rs. 30, 000 as specified under section 194J is applicable to each payment separately i.e. applicable independently to each of four items.
With effective from 1st of July 2012, TDS under section 194J is also applicable to remuneration, fees or commission paid to a director of a company which is not considered under the head salary. For this particular payment, threshold limit of Rs. 30, 000 as mentioned above is not applicable.
Section 194J is applicable to all persons who are making above payments during the financial year.
But the provisions of section 194J will not be applicable to an individual or HUF in following cases;
- Where technical or professional fee for above expenses are credited or paid exclusively for personal use of such individual or any member of HUF.
- Where total sales, gross receipts or turnover does not exceed the limits of Rs. 1 crore in cases of business or Rs. 25 Lakhs in cases of profession (i.e. if such individual or HUF is liable to tax audit under section 44AB of income tax act).
Applicability of Section 194J for certain specific cases
TDS deduction under section 194J is also applicable to following cases based on department’s circulars and case laws;
- Payment to hospitals for rendering medical services.
- Advertising agencies making payment to film artist towards professional fee.
- Payment to HR consultancy or recruitment agencies.
- Payment to share registrars by companies
Professional Services or Technical Services or Royalty or Non Compete Fee
What is Professional Fee under section 194J ?
Fee for following professional services will be treated as professional fee under section 194J of income tax act 1961;
- All such professionals as notified for the purpose of section 44AA of income tax act 1961; and
- Sports person;
- Umpires and referees;
- Coaches and trainers;
- Team physicians and physiotherapists;
- Event manager;
- Anchors and sports columnists;
Technical Services considered for Section 194J
Technical services mean any consideration for rendering following services;
But does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head salaries.
For the purpose of section 194J royalty is defined in explanation 2 to section 9(1) (vi) if income tax act. According to this section royalty means consideration for;
- the transfer of all or any rights (including the granting of a license) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property ;
- the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property ;
- the use of any patent, invention, model, design, secret formula or process or trade mark or similar property ;
- the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ;
- the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;
- the transfer of all or any rights (including the granting of a license) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or
- the rendering of any services in connection with the activities referred above.
Non compete fees for section 194J
Non compete fee for the purpose of section 194J means, any sum received or receivable in cash or kind under an agreement for not sharing any know-how, patent, copyright, trademark, license, franchise or any other business or commercial rights of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services.
It also includes any fee received for not carrying out any activity in relation to any business.
Time Limit to deposit tax deducted under section 194J
In case the deduction is done by or on behalf of the government then TDS deducted under section 194J has to be deposited on the same day.
In other cases, TDS under section 194J has to be deposited within one week from the end of the month in which such TDS has been deducted.
If the amount is credited or paid on the last day of the financial year i.e. 31st march then TDS has to be deposited within 2 months from the end of the financial year in which it is credited or paid.
The assessing officer on your application may allow deducting of TDS in special cases on quarterly basis i.e. 15th July, 15th October, 15th January and 15th April.
TDS at a lower rate under section 194J
Under section 197, the payee (i.e. the person receiving such insurance commission) can apply in form no: 13 to the assessing officer for lower deduction of TDS (i.e. lower than the rate specified under section 194J ).
If the assessing officer is satisfied then a certificate will be issued to the assessee for lower deduction of income tax. Such certificate has to be produced to the concern person deducting TDS under section 194J for lower deduction and the person deducting TDS has to deduct it at such lower rate and for the period as stated in the certificate.
FAQs on Section 194J – Professional Fee or Technical Fee
Company X has to pay Rs. 25, 000 toward professional fee and Rs. 28, 000 as fee towards technical services to one single person. Is it required to deduct TDS under section 194J as the total sum is Rs. 53, 000 which is more than Rs. 30, 000?
No, the threshold limit of Rs. 30, 000 is applicable individually to the items that are specified under section 194J of income tax act 1961.
Professional fee and fee for technical services are two separate items specified under section 194J. So the limit of Rs. 30, 000 will be applicable to each item separately instead of taking both together.
By applying the above provision of section 194J, neither professional fees nor the fee paid for technical charges are exceeding the limit of Rs. 30, 000 individually. So section 194J will not be applicable for deducting TDS.
T Bhargav Kumar says
I am working in a construction company(Limited Company), and we have taken the help of an univresity for our drawing of building purpose and they have charged an amount of Rs 750000 for that service. While i do payment to them whether i have to deduct TDS or not.Kindly suggest me.
Vishal Mehta says
If i receive professional service from NRI am I to charge service tax on that or pay service tax as reverse charge mechanism?
If we pay professional fee to a person for the whole year.
e.g:-Rs.55000/- and we deduct TDS of 10%
and my question is:
Q1. suppose for 1 or 2 month we pay 12000/- is 10% TDS applicable in this payment
We are organizing a conference and a company is ready to pay Rs. 3 lakhs as sponsorship . Is TDS applicable in this case? If TDS is applicable, what is the percentage they have to deduct from the sponsorship amount and can we get a refund of that amount while filing income tax return?
SV Mahesh says
We are paying t our Managing Director Remuneration of Rs.200000 per month .During 2015-16 We have paid 2400000 and remitted TDS @10% u/s 194J.Please let me know whether I am correct.
Suppose technical fee amount is basic 28220/- and service tax amount on that is Rs. 4091/- Total Bill amount is Rs. 32311/-. So What will do we? Tds deduct or not on above bill amount
Ashish kumar says
I have taken franchise from a foreign company, and now planning to pay amount for his marketing support in India in foreign currency.
Kindly confirm me, tds or tcs will be deducted or not?
sai vinod says
if tds is deducted under sec 194j i.e, fees for technical services it will come under which heads of income
Praveen Osta says
As per provision of Section 194J, TDS is deducted @10% for AMC of Computers and Peripherals. But, in the absence of any AMC, should TDS @ 10% be deducted for repairs of Computers and peripherals, if the expenditure is likely to exceed 30,000/-
Dipaksinh Jashvantsinh Solanki says
TDS Will be applicable on Testing charges of Construction Material ? Kindly give me solution
mitai mohan says
dear sir,my self working as consultant with monthly retainer fees rs 23000/- per month.from my fees rs 2300/- being deducted against tax deducted at source [tds],can’t it be exempted please kindly reply
You can file return and claim for the tds amount being deducted from your income.
Sandeep Jadhav says
I received water testing bill which is basic + service tax. can we deduct tds on his bill. it is technical service? Every service will be liable for deducting the tds?
I AM A PROPRIETOR OF A 3D GRAPHICS AND RENDERING COMPANY.WE MAKE 3D DESIGNS AND WALK THROUGH FOR BUILDINGS FOR DEVELOPERS AND BUILDERS ON COMPUTER MACHINES .I WANT TO KNOW THAT I COVER UNDER 149J OF INCOME TAX LAW?FOR DEDUCT TDS FOR TECHNICAL SERVICES FEE?
KOMAL MANEK says
MY COMPANY HAS TAKEN HR CONSULTANCY SERVICE FROM PRIVATE LIMITED COMPANY AND HR CONSULTANT HAS RAISED TWO SEPARATE BILL IN A MONTH FOR TWO DIFFERENT PERSONS.
ONE BILL FOR SERVICE IS BELOW 30000/- AND ONE BILL IS ABOVE 30000/-
WE ARE IN PLANING TO PAY CONSOLIDATED AMOUNT TO HR CONSULTANT FOR BOTH BILLS RAISED.
MY QUESTION IS: SHOULD WE DEDUCT TAX U/S. 194J SEPARATELY (BILLWISE) OR ON CONSOLIDATED AMOUNT AFTER DEDUCTING SERVICE TAX AMOUNT.
I am working as a consultant in an company and there wil be flat 10% tax deducted from my salary. But I am paying my home loan and all, is there a way to declare these and reduce my tax. In my company they said I cannot file normal investment declaration. Please guide me. Call me @+919176592768 if you know the answer. Thanks in advance,
Dear , you need to handover the interest certificate (interest paid on home loans ) to your company so thatr the same shall be considered as deduction while generating your form 16
MY INCOME FROM 194 J AND I HAVE RECEIVED 38500 PER MONTH THAN WHAT PAYMENT OF TAX WILL PAID IN AY 2016-17
Mohd Aslam Khan says
My company, a CPSU, has quoted professional fee as 5.13 % inclusive of all taxes,cess,royality etc for deposit works to be executed for a Nationalised Bank. Will you please clarify the taxes to be paid by my company for the professional fee to be recieved from the bank.
priyanka Gheewala says
Company has paid rs 20000 in Q 3 under section 194J & Q 4 section 194 j RS 25000 same person how to deduct tds & Filling? Q 3 is re retunt or No & Q 4 ?
Subodh Singha says
1.TDS will be applicable of franchise fee ? Kindly give me a solution, if charges , which section . Reply me .
Commander S Panda says
Could you please give the list of expenditures exempted from tax so that the cost of such expenditures can be deducted from the consultancy fee.
Thanks and Best Regards
Cdr S Panda