tds - 194 (J)
This query is : Resolved
13 December 2008
I read that sitting fees paid to directors would come under purview of 194(J).The reason it seems is that he can be defined as manager under companies act..1956,which seems to be an absurd explanation!! How can tat definition be applied to income tax act ???Should come under194(J) ??
13 December 2008
sec 194J can't be applied here.
no tds u/s 194 J is required to be deducted on sitting fees.
no tds u/s 194 J is required to be deducted on sitting fees.
13 December 2008
But that is hw it has been interpreted in all books !!!!!!
13 December 2008
A director is also a manager under the provisions of the Companies Act, 1956. He is, therefore, technical personnel. Any payment made to such director (be it sitting fee or any other sum) shall be required to be taken into consideration for the purposes of deduction of tax at source under section 194J.
Source: https://www.incometaxquery.com/tds/tdsonprofessionalfees.html
Source: https://www.incometaxquery.com/tds/tdsonprofessionalfees.html
14 December 2008
hw can companies act be applied to income tax act???
27 July 2025
This is a very relevant and commonly debated point. Let’s break this down clearly and with reference to the law and practice:
---
### ✅ **Short Answer:**
Yes, **TDS is required under Section 194J** on **sitting fees paid to directors** — as per Income Tax provisions, even if it seems odd to derive interpretation using Companies Act definitions.
---
### 📘 **Why Section 194J Applies:**
Section 194J of the Income Tax Act deals with **TDS on fees for professional or technical services**, and includes:
> “…remuneration or fees or commission by whatever name called, **paid to a director**, which is not in the nature of salary…”
This clause was **explicitly inserted** by the **Finance Act, 2012**, with **retrospective effect from 1st July 194J.**
So this is no longer a matter of indirect interpretation — it's now **clearly written in the Income Tax Act itself.**
> 📌 **So, sitting fees paid to directors (not being employees)** are subject to **TDS under Section 194J at 10%**.
---
### 🏛️ **Background – Pre-2012 Confusion (Your Point)**
You are right that earlier, there was debate whether directors could be considered as professionals under Section 194J. The justification often used (and which you quoted) relied on:
* Companies Act definition of director as managerial personnel,
* And argument that director functions as a professional advisor or manager.
This logic was **debatable** — but that's why the **law was amended in 2012** to remove ambiguity. Now the **TDS on director fees (not salary)** falls squarely under **194J**.
---
### ⚠️ **Important Distinction:**
| **Type of Payment to Director** | **TDS Section** | **Remarks** |
| -------------------------------------- | --------------- | -------------------------- |
| Salary (executive director/employee) | **192** | Treated as salary; no 194J |
| Sitting Fees / Commission (non-salary) | **194J** | 10% TDS, no threshold |
---
### 📝 **Conclusion:**
* Yes, **TDS under 194J applies** to **sitting fees** to directors.
* The **legal basis is now explicit** — not just based on Companies Act interpretation.
* Before 2012, there was confusion, but now the Income Tax Act itself mandates it.
Let me know if you’d like references to official CBDT circulars or sample entries for accounting this TDS.
---
### ✅ **Short Answer:**
Yes, **TDS is required under Section 194J** on **sitting fees paid to directors** — as per Income Tax provisions, even if it seems odd to derive interpretation using Companies Act definitions.
---
### 📘 **Why Section 194J Applies:**
Section 194J of the Income Tax Act deals with **TDS on fees for professional or technical services**, and includes:
> “…remuneration or fees or commission by whatever name called, **paid to a director**, which is not in the nature of salary…”
This clause was **explicitly inserted** by the **Finance Act, 2012**, with **retrospective effect from 1st July 194J.**
So this is no longer a matter of indirect interpretation — it's now **clearly written in the Income Tax Act itself.**
> 📌 **So, sitting fees paid to directors (not being employees)** are subject to **TDS under Section 194J at 10%**.
---
### 🏛️ **Background – Pre-2012 Confusion (Your Point)**
You are right that earlier, there was debate whether directors could be considered as professionals under Section 194J. The justification often used (and which you quoted) relied on:
* Companies Act definition of director as managerial personnel,
* And argument that director functions as a professional advisor or manager.
This logic was **debatable** — but that's why the **law was amended in 2012** to remove ambiguity. Now the **TDS on director fees (not salary)** falls squarely under **194J**.
---
### ⚠️ **Important Distinction:**
| **Type of Payment to Director** | **TDS Section** | **Remarks** |
| -------------------------------------- | --------------- | -------------------------- |
| Salary (executive director/employee) | **192** | Treated as salary; no 194J |
| Sitting Fees / Commission (non-salary) | **194J** | 10% TDS, no threshold |
---
### 📝 **Conclusion:**
* Yes, **TDS under 194J applies** to **sitting fees** to directors.
* The **legal basis is now explicit** — not just based on Companies Act interpretation.
* Before 2012, there was confusion, but now the Income Tax Act itself mandates it.
Let me know if you’d like references to official CBDT circulars or sample entries for accounting this TDS.
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