Purview of TDS Section 194J fees for Profession or technical services
Any person not being an individual or a HUF
who is responsible for paying to a resident by way of fees for professional or technical services royalty and any sum referred to clause (va) of section 28 is liable to deduct tax at source in case aggregate of the amounts
of such sums credited or paid or likely to be credited or paid during the financial year
by the aforesaid person to the account of, or to the payee exceeds Rs. 20,000/-. This limit of Rs. 20,000/- has been enhanced to Rs. 30,000/- w.e.f. 1.7.2010.
Individuals and/ or HUFs
who are subject to tax audit u/s 44AB during the financial year immediately preceding the financial year in which such fee for professional or technical services including royalty is credited or paid are also liable to deduct tax at source.
This section is applicable with effect from 1.7.1995.
Moreover where any such income by way of Professional or Technical services etc. is credited to ‘Suspense Account’ or to any other account shall also be liable to deduct tax at source.
Meanings of the word ‘Professional Services’ and ‘Fees for Technical Services’
As per explanation appended to this Section the meaning of the word `Professional Services, Fees for Technical Services and Royalty’ has been defined as under:
Professional Services’ means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of Section 44AA or of this section.
Fees For Technical Services’ shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9, which is as under:
‘fee for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provisions of services of technical or other personnel) 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’.
‘Royalty’ shall have the same meaning as in Explanation to clause (vi) of sub –
section (1) of Section 9
Other Professions notified by the Board under section 44AA(1)
Other professions notified by the Board u/s 44AA(1) are :
(1) The profession of authorised representative
“authorised representative” means a person who represents any other person,on payment of any fee or remuneration, before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the professional accountancy.
[Notification No. SO 18E dated 12.1.1977]
(2) The profession of film artist
“film artist” means any person engaged in his professional capacity in the production of a cinematograph film, whether produced by him or by any other person, as –,
(i) an actor;
(ii) a cameraman;
(iii) a director, including an assistant director;
(iv) a music director, including an assistant music director;
(v) an art director, including an assistant art director;
(vi) a dance director, including an assistant dance director;
(vii) an editor;
(viii) a singer;
(ix) a lyricist;
(x) a story writer;
(xi) a screen-play writer;
(xii) a dialogue writer; and
(xiii) a dress designer.
[Notification No. SO 18E dated 12.1.1977]
(3)The profession of company secretary
‘company secretary’ means a person who is a member of the Institute of Company Secretaries of India in practice with in in practice with in the meaning of sub-section (2) of section 2 of the Company Secretaries Act, 1980.
[Notification No. SO 2675 dated 25.9.1992]
(4) The profession of information technology
[Notification No. SO 385 E dated 4.5.2001]
CBDT vide Notification No. 890(E) dated 26.9.2000 [F. No. 142/49/2000-TPL] has treated the following services as information technology enabled products or services for the purposes of sections 10A(b)(i)(2), 10B(b)(i)(2), 80HHE(b):
(a) Back office Operations
(b) Call Centres
(c) Content Development or Animation
(d) Data Processing
(e) Engineering & Design
(f) Geographic Information System Services
(g) Human Resources Services (o) Site Services
(h) Insurance Claim Processing
(i) Legal Databases
(j) Medical Transcriptttion
(l) Remote Maintenance
(m) Revenue Accounting
(n) Support Centres Web
No deduction if sum paid/credited for personal purposes
Individuals and H.U.F. covered by section 44AB need not deduct tax at source on payment for Professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu Undivided Family.
[3rd Proviso to section 194J(1) w.e.f. 1.6.2003].
Status of Advertising Professionals
Payment for Advertising have been covered under section 194C as well as u/s 194J . In this connection C.B.D.T. has clarified that section 194C will apply to payments made to the advertising agency in connection with services rendered by such agency in the area of advertising. When payments are made by advertising agency to professionals engaged by such agency in connection with the execution of advertising jobs, the payments to these professionals e.g. film artist, an actor, a cameraman etc. would attract the provisions of section 194J.
[Circular No 714 dated 3.8.1995 (215 ITR (St) 5)]
It was further clarified that any payment is liable for tax deduction only under one section.
[Circular No. 720 dated 30.8.1995]
Persons liable to deduct tax at source
Any person, not being an individual or a Hindu Undivided Family, who is responsible for paying to a resident any sum by way of
(a) Fees for Professional Services, or
(b) Fees for Technical Services.
(c) Royalty; or (w.e.f. 13.7.2006)
(d) Any sum referred to in clause (va) of Section 28 (w.e.f. 13.7.06)
as and when the aggregate of the amounts of such credited or paid or likely to be credited or paid during the financial year exceeds Rs. 30,000/-.
Individuals or HUFs who are subject to tax tax audit under Section 44AB during the financial year immediately preceding the financial year in which such sum by way of fees for Professional or Technical Services is paid or credited shall also be liable to deduct tax at source. However if the payment by such individuals and/or H.U.F. is for personal purposes of such individual or any member of the family no deduction of tax is required to be made.
Time of deduction and Rate
At the time of credit of such sum to the account of the payee or at the time of payment thereof in cash/ cheque etc. whichever is earlier.
Tax is required to be deducted at source @ 10%
This rate of 10% has been enhanced from 5% w.e.f. 1.8.2007.
Amendment Proposed by Union Budget 2012-13
Remuneration to a Director other than in the nature of Salary shall be liable to deduct tax at source @ 10% u/s 194J (w.e.f. 1.7.2012).Cut off limit of Rs 30000/- is not applicable.
Citation of Circulars/ Case Laws
(1) Payments to hospital liable to TDS Payments to a hospital for rendering medical services liable to TDS u/s 194J.
[Circular No. 715 dated 8.8.1995 (215 ITR (St) 17)]
(2) Payments to an electrician attracts the provisions of section 194C Payments to an electrician or to a contractor who provides services of an electrician will be in the nature of payment made in pursuance of a contract for carrying out any work, and therefore attract the provision of section 194C.
[Circular No. 715 dated 8.8.1995]
(3) Payments by advertisement agency to certain professionals When an advertising agency makes payments to a film artist such as cameraman etc., tax will be deducted at source.
[Circular No. 715 dated 8.8.1995]
(5) TDS on service tax on professional services fees under section 194 -1 is applicable.
Thanks & Regards,