Section 194J of the Income Tax Act, 1961, deals with the TDS on payments made in the form of professional or technical fees, royalties, remuneration fees, and commissions. As per Sec. 194J provisions, an individual has to deduct the tax either at the rate of 2% or 10% based on the income category. Any person, including an individual and HUF in certain cases, whose total turnover exceeds the threshold, is required to make TDS deductions.

Payment Types Covered under Section 194J

As per Section 194J, taxpayers need to deduct TDS in case the below-mentioned payments are made to a resident in a particular financial year: 

  • Fees for professional services

  • Fees for technical services

  • Remuneration/fees/commission to a company (other than those deductible under Section 192)

  • Royalty

  • Income generated under Section 28(va), such as those not carrying any relation to any business/profession or business or commercial right

 

You need to know the following definitions to understand the applicability of Section 194J: 

1. Professional services

It is the individual's services for carrying on legal, medical, engineering or architectural professions. These include the following and any other occupation approved by the Central Board of Direct Taxes (CBDT) u/s 44AA:

  • Advertising

  • Accountancy

  • Technical Consultancy

  • Interior Decoration 

2. Technical services

As per the IT rules, ‘technical services fees’ mean managerial, consultancy, and technical services but do not include salary payments. The following are not considered technical services:

  • Mining

  • Assembly

  • Construction Services

Who Can Deduct TDS under Section 194J

Any individual paying for technical or professional services must deduct TDS. However, the entities listed below are not expected to deduct tax at source on such payments:

  • If a HUF or an individual has a business and the turnover is under ₹1 Crore during the last financial year.

  • If a HUF or an individual practises a profession and the turnover is under ₹50 Lakhs during the last financial year.

 

Simply put, all entities (other than an individual/HUF who are not expected to do a tax audit the previous year) will have to deduct TDS while paying technical service or professional fees.

Threshold Limit for Tax Deducted at Source u/s 194J

The tax has to be deducted if the technical and professional service payment is more than ₹30,000 for that particular year. 

 

This maximum limit of ₹30,000 is applicable for each payment or item independently. However, there is no such limit for payments (fees, remuneration, or commission). 

 

Here is an illustration to help you understand the applicability of Section 194J TDS limit. A company named ABC made the following payments to Mr. X for his services:

Particulars 

Payments

Payment for Professional Services 

₹15,000

Payment for Technical Services

₹28,000

Total Payment to Mr. X 

₹43,000

Since the Section 194J limit applies independently for each category, ABC company will not be liable to deduct TDS while paying Mr. X. In case the payment exceeds the limit, the company will have to deduct tax when (whichever is earlier):

  • Passing those payment entries into the accounts

  • While making the payment of the expense incurred

Time Limit to Deposit TDS u/s 194J

Check the following table to know the due dates for making TDS deposits: 

 

Deductors who are not the government 

Deductors from the government

Payments that are made before 01 March

7th day from the end of the month

7th day from the end of the month

Payments that are made in March

30 April

Tax payment is made during the day of technical or professional payment to the payee. The challan is to be deposited by the 7th day from the end of March.

Rate of TDS Deduction

Under Section 194J, TDS rates apply to payments for professional technical services. The rates for deduction are as below: 

Payment Nature

TDS Rate u/s 194J 

Technical services fee payment

2%

Call centres fee payment

10%

Royalty paid for the screening, distribution and sale of a movie

2%

Other payments

10%

In case the individual fails to provide PAN information

20%

Frequently Asked Questions

What are professional fees?

Professional fees are payments made to individuals specialising in specific arts, science, and commerce fields. It includes fees paid to professionals like doctors, lawyers, advertisers, chartered accountants, etc.

How can I claim TDS deducted under Section 194J?

You can claim TDS u/s 194J if your net income is lower than the total taxable income. To get a refund, you will need to file your ITR.

What is the deduction limit under Section 194J of the Income Tax Act?

The entity paying for the service is liable to deduct TDS if the payment towards technical or professional services goes over ₹30,000 per annum.

Can I pay for professional services without deducting TDS?

No, it is mandatory to deduct TDS on professional fees if the payments exceed the Section 194J limit.

What are the implications of delayed or non-deduction of TDS?

In case of non-payment of TDS within the due date, around 30% of the expense will be disallowed in a financial year in which the expense is claimed (taken to the P/L account).


An interest of 1% each month has to be paid in case the TDS was made but not deducted. If no tax is deducted, the interest will be 1.5% each month.

What are Sections 194JA and 194JB of the Income Tax Act?

Section 194JA of the Income Tax Act requires payers to deduct TDS at the rate of 2% on fees for financial and technical services. As per Section 194JB of the Income Tax, payers need to deduct 10% on other compensations.

Earn interest up to 8.50% p.a. by investing in a Bajaj Finance Fixed Deposit | Rated CRISIL AAA/ STABLE and [ICRA]AAA(stable) Invest Now
Home
active_tab
Loan Offer
active_tab
Download App
active_tab
Credit Score
active_tab