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Section 194J | TDS on fees for professional or technical services

CCI Team 
on 07 March 2020

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Update: The rates of TDS on non-salaried specified payments made to residents has been reduced by 25% for the period from 14th  May 2020  to 31st March 2021 by FM in the Economic Relief Package. 

What is TDS Section 194J?

Section 194J of the Income Tax Act 1961 contains provisions with respect to TDS deduction on fees for professional or technical services. This article gives a complete overview of the TDS Section 194J and explains the applicability, rate of TDS u/s 194J and lot more.

Section 194J   TDS on fees for professional or technical services

1. Who is liable to deduct TDS u/s 194J?

Every person other than an individual/HUF who is liable to make the following payments to any resident is liable to deduct TDS u/s 194J:

Fees for professional services or
• Fees for technical services or
• Any remuneration/fees/commission whatever name called to a director of a company other than the payment on which tax is deductible u/s 192 or
• Royalty or
• Non-compete fees u/s 28(va)

*Individual/HUF falling under the scope of section 44AB are included.

 

Meaning of Professional Services:

 

The meaning of Professional Services under Section 194J include:

• Medical, legal, engineering, or architectural profession, accountancy, technical consultancy, or interior decoration.

• Professional services notified in section 44AA

- The profession of film artist
- The profession of authorized representative
- The profession of Company Secretary

• Professional Services rendered in relation to sports activities notified by CBDT for section 194J

- Sports Persons
- Referees and Umpires
- Trainers and Coaches
- Commentators
- Anchors
- Sports Columnists
- Event Managers
- Physiotherapists

Meaning of fees for technical services:

Payment made for any of the following services are covered under the meaning of fees for technical services:

- Technical services
- Managerial services
- Consultancy Services
- Provision of services of technical or other personnel

2. At what rate TDS is deducted under TDS Section 194J?

TDS under section 194J is deducted at the following rates:

   

Category

Rate

Payee engaged only in the business of the operation of call center.

Payee engaged in any other business operation/profession covered under the scope of194J

2%

10%

If PAN not furnished by the payee

20%

3. What is the time of deduction under TDS Section 194J?

TDS under Section 194J of the Income Tax is to be deducted at the time of:

- Credit of such amount to the account of the payee or
- Payment of such amount to the payee in cash/cheque/draft/any other mode, whichever is earlier.

The term credit here has an interesting meaning where such amount is credited to the account of the payee whether called suspense account or any other name in the books of account of the person liable to make such payment shall be deemed to have been credited to the account of the payee and TDS shall be deducted accordingly.

4. What is the threshold under TDS Section 194J?

TDS under section 194J is not deducted in case the prescribed payment/credit does not exceed the prescribed threshold limit.

   

Category

Threshold Limit

Fees for professional services

Rs 30000

Fees for technical services

Rs 30000

Royalty

Rs 30000

Non-compete fees

Rs 30000

Remuneration/commission/fees payable to a director of a company

No such limit

Note- The limit is applicable separately for each of the above services under section 194J i.e. if the payment to a person towards each of the above categories is less than Rs 30000 but exceeds Rs 30000 in aggregate TDS is not to be deducted.

5. What are the conditions for non-applicability of TDS Section 194J?

TDS Section 194J is not applicable in the following cases:

- If the prescribed payment is made by an individual/HUF. However, if the payment is made by individual/HUF who falls under *44AB(a)/44AB(b) is liable to deduct TDS under section 194J.

*Section 44AB(a) includes those Businesses whose Total turnover or gross receipts for a financial year exceeds Rs. 1 crore

*Section 44AB(b) includes those Professionals whose Total Gross Receipts for a financial year exceeds Rs. 50 Lakhs.

- Further, an individual/HUF is not liable to pay TDS under section 194J if the payment is made or credited exclusively for personal purposes.

Amendment in Finance Bill 2020 in TDS Section 194J:

As per the Finance Bill 2020, the following amendments have been made in TDS Section 194J which will take effect from 1/04/2020:

-The rate at which TDS will be deducted under section 194J will be 2% in case of fees for technical services (not being professional services) and 10% of such sum in any other case. 

- Individual/HUF, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed 1 crore rupee in case of business or Rs 50 lacs in case of the profession during the FY immediately preceding the FY in which such interest is credited or paid, shall be liable to deduct TDS.


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