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
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:
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%** |
---
### 🔍 **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**.
---
### 🔧 **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).
---
### 📌 **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**.
---
Let me know if you’d like help preparing the correction return or using the latest RPU/FVU versions.