Section 194J: TDS on Professional Fees
TDS needs to be deducted by deductor other than an individual or a HUF, @ 10% on any amount paid or payable to any resident in excess of Rs. 30,000 as:
- Fees for professional services
- Fees for technical services
- Any remuneration or fees or commission by whatever name called paid to a director ( other than salary)
- Any sum referred to in clause (VA) of section 28.
What is the meaning of Professional fees under section 194J?
Under section 194J, Professional services are services provided by a person in course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or interior decoration or technical consultancy or advertising or such profession as is notified by the Board for the purpose of section 44AA.
Fees for Technical Services means fees paid for rendering any managerial, technical or consultancy services.
When to deduct TDS under section 194J?
TDS shall be deducted at the time of:
- Crediting the sum to payee account or
- Actual payment of cash or
- Payment via cheque, draft or via any other source, whichever is earlier.
It shall be noted that if the payee of the amount credits the amount to be paid to “suspense account” or any other account by whatever name called, it shall be considered as deemed payment and TDS is required to be deducted on such credit.
TDS Rates under section 194J
TDS was applicable 10% on all the services. However, FY 20-21 onwards, the following changes have been made:
Deductor shall issue Form 16A in favour of the deductee as the Tax Certificate of the amount deducted as TDS.
TDS shall be deducted at the rate of 20% in the case where the payee does not provide with the PAN.
Who is exempt from deduction of TDS u/s 194J?
Section 194J shall not apply in the following cases :
- If the aggregate amount of services received during a financial year does not exceed Rs 30,000.
- If the payer is an Individual or HUF. However, the section states that if the total sales, gross receipt or turnover from the business or profession exceeds the monetary limit provided u/s 44AB ( i.e 1 cr in case of business and 25 lakhs in case of the profession) both the entities shall be required to deduct TDS on the amount paid.
- Section 194J also states that no individual or HUF shall be required to deduct TDS on the amount of services acquired if they are consumed for a personal purpose/home consumption.
1. When is Section 194J is applicable?
TDS deduction u/s 194J is also applicable to following specific cases:
- Payments made to hospitals for rendering medical services.
- Payments made to HR Consultancy or Recruitment agencies.
- Advertising agencies making payment to film artist towards professional fee.
- Payment made to share registrars by companies.
2. What is TDS at a lower rate under section 194J?
As per section 197, the payee can apply in form no. 13 to his Assessing Officer (AO) for lower deduction of TDS ( lower than the rate specified under section 194J).
If the AO is satisfied with the justification provided by the payee, he will issue a certificate for lower deduction of income tax. Such a certificate has to be produced to the deductor for a lower rate of deduction. The payee can take a benefit of a lower rate for the period stated in the certificate.
3. What is the limit of section 194J?
Rs. 30,000 is the limit of section 194J. It is applicable on each item or payment independently for a particular FY.