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Section 194J: TDS on Professional Fees

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Hiral Vakil

TDS
TDS Sections
Last updated on June 21st, 2021

What is Section 194J?

TDS u/s 194J needs to be deducted by deductor other than an individual or an HUF, @ 10% on any amount paid or payable to any which is in excess of Rs. 30,000 as:

  1. Fees for professional services
  2. Fees for technical services
  3. Any remuneration or fees or commission by whatever name called paid to a director ( other than salary)
  4. Royalty
  5. Any sum referred to in clause (VA) of section 28.
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

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.

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

When to deduct TDS under section 194J?

TDS shall be deducted at the time of:

  1. Crediting the sum to payee account or
  2. Actual payment of cash or
  3. Payment made 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 also 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:

chart of rates u/s 194J

Deductor shall issue Form 16A in favour of the deductee as the Tax Certificate of the amount deducted as TDS.

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TDS (Tax Deducted at Source) is a part of Income Tax. TDS should be dedcuted by a person for specific payments made.
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TDS (Tax Deducted at Source) is a part of Income Tax. TDS should be dedcuted by a person for specific payments made.
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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 :

TDS Return (26Q) for Non-Salary Payments (Quarterly)
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TDS Return (26Q) for Non-Salary Payments (Quarterly)
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FAQs

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.

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.

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.

Got Questions? Ask Away!

  1. Hey @Dia_malhotra

    As per section 194A, TDS on interest other than interest on securities is required to be deducted by any person other than Individual or HUF at the rate of 10%, when paid to a resident. No surcharge, education cess or SHEC shall be added to the above rate.

    Hope this helps!

  2. Hey @HarishMehta

    TDS u/s 194J needs to be deducted by deductor other than an individual or a HUF, @ 10% on any amount paid or payable to any which is in excess of INR 30,000 as:

    1. Fees for professional services
    2. Fees for technical services
    3. Any remuneration or fees or commission by whatever name called paid to a director ( other than salary)
    4. Royalty
    5. Any sum referred to in clause (VA) of section 28.

    Hope this helps!

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