Deduction of Tax At Source proves to be very much helpful to Government of India in the Collection of Taxes as well as reduces the Burden for the Tax Payer as they get the Credit of TDS at the time of filing of Income Tax Return as it reduces the Tax Burden. Organizations also make payment towards the Fees for Professional as well as Technical Services. The above article on “Section 194J of Income Tax Act :TDS on Fees for Professional or Technical Services-with FAQ’s” contains the Applicability, Threshold, Rate, Time of Deduction, Who is liable to Deduct, Time Limit , Consequences of Non Payment.
Section 194J(a) vs. 194J(b)
Section 194J is further subdivided into two sub-sections which are as follows: a) Section 194J(a) Payment towards Technical Services: Payment for Technical Services including Managerial & Technical Consultancy Services Like Call Center, Royalty for sale, Distribution or exhibition of cinematographic films etc.
b) Section 194J(b) Payment towards Professional Services: Payment for Professional Charges including Fees to Lawyer, Chartered Accountant, Doctor, Engineer, Architect, Interior Decorators, Advertisers etc.
Applicability of Section 194J of Income Tax Act, 1961:
EVERY PERSON other than an individual/HUF who is liable to make the payments IN EXCESS OF Rs. 30000 DURING A FINANCIAL YEAR to any RESIDENT towards the NOTIFIED SERVICES is liable to deduct TDS u/s 194J. The list of Services are as follows:
- Fees for professional services
- Fees for technical services
- Any remuneration/fees/commission whatever name called to a director of a company other than the payment of salary
- Royalty or
- Individual/HUF falling Liable to Audit under section 44AB are included.( In case of business/Profession the Total Sales/Gross Receipts Exceeds 1Crore/50 Lakh)
Time of TDS Deduction u/s 194J of Income Tax Act, 1961
TDS u/s 194J is to be Deducted as follows:
a) At the Time of credit of sum to the account of the payee
b) At the time of payment in cash / cheque / draft or any other mode
Whichever is earlier
Threshold of TDS u/s 194J of Income Tax Act
No TDS is to be deducted where the payment doesn’t exceed the Threshold of INR 30000 in a Financial Year.
Note: The limit of INR 30,000/- is not a total limit for all services. It shall be calculated individually for payment as professional fees or technical fees or royalty or non-competence fees.
Rate of TDS Deduction u/s 194J of Income Tax Act, 1961
Section 194J provides for deduction of Income Tax at source (TDS) in respect of payments made to any resident any sum by way of the following at the specified rates which are as follows:
|Particulars||Threshold Limit||Rate of TDS |
(If the payee is engaged only in the business of operation of call centre)
|Rate of TDS (Others)|
|Fees for professional services||30000||2%||10%|
|Fees for technical services||30000||2%||10%|
|Any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company (Director Fees)||NA||2%||10%|
FAQ’s on Section 194J TDS on Fees for Professional or Technical Services
FAQ 1: What is Section 194J?
Section 194J of the Income Tax Act, 1961 requires every person who makes payment to a resident for Notified Services is required to deduct TDS @ 10% or 2% on case to case basis.
FAQ 2: What is the Meaning of Fees for Professional Services?
*Accountancy or Technical Consultancy Services
*Interior Decoration Services
*Notified Professions (which are related to sports activities; sportspersons, umpires, referees, coaches, trainers, team physicians, physiotherapists, event managers, commentators, anchors, sports columnists)
FAQ 3: What is the Meaning of Fees for Technical Services?
Any sum paid (including any lump sum Payment) for the rendering of any
ii) Technical or
iii) Consultancy services (including the provision of services of technical or other personnel)
Note: Following Services are not covered in the definition of Technical Services:
iii) Mining or
iv) like a project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.
FAQ 4: What is the Threshold for the Deduction of TDS u/s 194J of Income Tax Act,1961?
TDS is not deductible in case the payment doesn’t exceed the prescribed THRESHOLD EXEMPTION limit of INR 30000 IN A FINANCIAL YEAR.
FAQ 5: What are the Notified List of Services for which the TDS is to be Deducted u/s 194J?
The Notified List of Services are as follows:
a)Fees for professional services;
b) Fees for technical services;
d) Remuneration / fees / commission paid to director of the company (excluding salary);
e) Fees paid for not carrying out any activity in relation to any business or profession;
f) Fees paid for not sharing any technical know-how, copyright, trade mark, patent or any other business or commercial rights
FAQ 6: What is the Rate of TDS u/s 194J of Income Tax Act?
Rate of TDS Deduction u/s 194J of Income Tax Act is as follows:
a) In case Payee is engaged in the Business of Operating Call Center & payment is made to Resident: 2%
b)Other cases: 10%
NOTE: The TDS rate u/s 194J is 20% without PAN/INVALID PAN.
FAQ 7: When TDS is to be deducted?
a) At the time of Credit to the account of the receiver
b) Actual payment
Whichever is earlier
FAQ 8: Is TDS applicable on legal charges?
Yes, if the Aggregate of amount exceeds INR 30,000 during the financial year.
FAQ 9: What is the TDS rates for consultancy Charges?
TDS will be deducted @ 10% u/s 194J of the Income Tax Act, 1961.
FAQ 10: What are the Consequences of non-deduction or late deduction of TDS u/s 194J?
30% of the Expenses will be disallowed & the same can be reclaimed in the year in which TDS is deducted and paid.
FAQ 11: What is the Liability towards Interest on failure to deduct or pay TDS?
a) Failure to deduct TDS: Interest @ 1% per month/part of month from the date on which such tax was required to be deducted up to the date of actual deduction.
b) Failure to pay/ deposit TDS: interest will be 1.5% per month/part of month from the date on which such tax was deducted up to the date of payment to the government.
FAQ 12: What is the Due Date For Payment of TDS u/s 194J if deductor is a Non-Government Tax Payer?
a) Payment for the TDS deducted (From April-Feb): 7th day from the end of the month in which TDS is deducted.
b) Payment for the TDS deducted for the Month of March: 30th April
FAQ 13: What is the Due Date For Payment of TDS u/s 194J if deductor is a Government Tax Payer?
a) Payment for the TDS deducted (From April-March): 7th day from the end of the month in which TDS is deducted.
FAQ 14: Are we liable to deduct TDS on the consultancy services of a professional that are availed for the personal use of payer before paying his fees?
No, the taxpayer is not obliged to deduct TDS for the services availed for personal use
FAQ 15:Whether TDS is applicable on Routine maintenance contracts?
Payment made for routine maintenance contracts (including the supply of spares) will be liable to TDS u/s 194C. But if such payment is made for giving any technical services then Section 194J will become applicable.
FAQ 16: Whether TDS is applicable on Recruitment Agencies?
Any payment made to recruitment agencies (like Monster India or Naukri.com etc) will be liable to TDS u/s 194J.
FAQ 17: Whether TDS is to be deducted on GST Amount?
if the GST value is shown separately on the bill, TDS will be applicable on the amount excluding GST.
FAQ 18: Whether TDS is to be deducted on GST Amount?
Commission paid by a media house (like TimesNow) to any advertising agency (like FoxyMoron) will be liable to TDS u/s 194J.
Hope this article would clear all the queries pertaining to Section 194J of Income Tax Act, 1961.
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