TDS RETURN Q1 FY.2020-21 Default in 194J

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This query is : Resolved

Quick Summary

If you've received a short deduction notice for TDS under Section 194J for Q1 FY2020-21, it's likely due to a software issue treating all 194J payments as 10% instead of the correct 2% for technical services. Ensure you are using the latest RPU and FVU versions, and crucially, select the specific code '194J(a)' for technical services (2%) when filing your return. You will need to file a correction statement on TRACES to rectify this.

Tara Khandelwal

Tara Khandelwal (Querist)
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31 July 2020 Sir
I have filed TDS Return for Q1 ended June 2020. I have paid TDS according to 194J Technical services at the rate of 2%.
Now there is a demand showing short deduction under 194J. The software is taking 194J at the rate of 10% only. Is there any updation of the same and I have selected only 194J. Is there any sub classification under 194J as A and B

Please resolve

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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09 August 2020 Has the issue been resolved till now ?

Tara Khandelwal

Tara Khandelwal (Querist)
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10 August 2020 @ Asha kanta Sharma
No not yet resolved

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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28 July 2025 Yes, your observation is correct, and the issue relates to **Section 194J** and the **revised TDS rates applicable from FY 2020-21**. Here's a detailed explanation and solution:

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### ✅ **Background: Section 194J – TDS Rates from FY 2020-21 (w\.e.f. 01.04.2020)**

The Finance Act 2020 introduced **two different rates** under Section 194J:

| Nature of Payment | TDS Rate |
| ------------------------------------------------------------- | -------- |
| Fees for professional services | 10% |
| Fees for technical services (not being professional services) | **2%** |

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### 🔍 **Your Case:**

* You deducted TDS at **2%** on payments under **194J – Technical Services**, which is correct **as per law**.
* But the **RPU/FVU utility** or the TRACES system may be **treating all 194J entries as 10%**, causing a **short deduction default**.

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### 🔧 **Solution / Resolution:**

1. ✅ **RPU Version Update:**

* Ensure you are using the **latest version** of **RPU (Return Preparation Utility)** and **FVU (File Validation Utility)**.
* The latest versions support the **bifurcation of 194J** into:

* **"194J(a)"** – Fees for Technical Services (TDS @ 2%)
* **"194J(b)"** – Other Professional Services (TDS @ 10%)

2. ✅ **Correct Code Selection in Return:**

* While preparing the TDS return, **select the correct sub-code** under **194J**:

* **“194J(a)”** for **Technical Services** (2%)
* **“194J(b)”** for **Professional Services / Royalty / Non-compete fees** (10%)
* This is critical. If you just select "194J" generically, the system defaults to 10%.

3. 🛠️ **Correction Statement Filing:**

* You need to file a **correction return**:

* Download **conso file** from TRACES
* Update the **section code** from “194J” to **“194J(a)”**
* Validate using FVU
* Upload corrected return

4. 💰 **Don't Pay the Demand Yet:**

* If you correct the return properly, the **short deduction demand will be removed**.
* Pay only if there was an actual short deduction (which seems not the case here).

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### 📌 **Important Note:**

* This problem was **common in Q1 FY 2020-21**, especially if RPU v3.1 or older was used.
* The **CBDT and TRACES** later updated utilities to allow **correct classification under 194J**.

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Let me know if you’d like help preparing the correction return or using the latest RPU/FVU versions.

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