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Updated on November 21, 2024 02:00:53 PM
Under section 194J of the Income Tax Act, 1961, Tax is deducted at source (TDS) on Professional and Technical services. The TDS on professional and technical services is the tax that is levied on the payment of fees for professional and technical services. This tax is deducted at the source of payment to the payee on crossing the threshold limit of ₹30,000. The rate of TDS on Professional and Technical services applicable on a transaction depends upon the nature of services provided. TDS @ 2% is deducted for Technical services and TDS @ 10% is deducted for professional services.
Read all the details given in this article to get a clear picture of TDS u/s 194J on professional and technical services. This article will clear out the concepts including threshold limit, applicability, TDS rates, time limit for depositing, and exemptions under 194J.
Under Section 194J of the Income Tax Act 1961, any person other than an individual or HUF is responsible for deducting tax at source (TDS) before the payment of any sum to a resident as fees for professional or technical services, remuneration, royalty, and non-compete fees (NCF) to the payee. TDS under section 194J is not applicable to individuals and Hindu Undivided Family (HUF).
However, individuals and HUFs are required to deduct TDS u/s 194J if last year's turnover was greater than ₹1 crore in the case of business and gross receipts were greater than ₹50 lakhs in the case of profession.
This section is applicable to “every person other than an individual or a HUF” who is responsible for paying to a resident any sum by way of:
Individuals and HUFs are required to deduct TDS u/s 194J if last year's turnover was greater than ₹1 crore in the case of business and gross receipts were greater than ₹50 lakhs in the case of profession.
Here is the threshold limit for deducting tax on TDS on professional or technical services:
| Nature of Payment | TDS Rate u/s 194J | Threshold Limit u/s 194J |
|---|---|---|
| Fees for technical services (excluding professional services) | 2% | ₹30,000 |
| Fees for professional services | 10% | ₹30,000 |
| Royalty (consideration of sale, distribution or Exhibition of Cinematographic films) | 2% | ₹30,000 |
| Other Royalty | 10% | ₹30,000 |
| Payee do not provide PAN details | 20% | ₹30,000 |
In the following cases, the TDS rate is 2% instead of 10%:
Professional services are services that are provided by individuals or businesses carrying on medical, legal, architectural, or engineering professions. It also includes accountancy, advertising, interior decoration, technical consultancy, or any other profession notified by the CBDT Board under Section 44AA.
CBDT notifies that payments made to sportspersons, sports columnists, referees, physiotherapists, team physicians, anchors, and event managers will also be regarded as fees for professional services and accordingly be liable to TDS u/s 194J.
Here is the list of professional services under Section 194J:
According to income tax regulations, "fees for technical services" refers to the management, technical, and consulting services; however, it does not include sums of money that the beneficiary of such income views as compensation.
As per the Supreme Court judgment, technical service includes services provided by humans. “It does not include services provided by machines or robots”.
Here is the list of technical services under Section 194J for TDS on professional and technical services:
The TDS u/s 194J on fees for professional and technical services should be deducted at the time of:
In a case where individuals and HUF make payment or credit in their Books of Account, any fee for professional services that is exclusively for personal purpose of such individuals and HUF, then TDS u/s 194J is not required to be deducted for the payment of fees for such professional or technical service.
TDS on Professional and Technical services which is deducted u/s 194J and is required to be deposited to the central government. Time to deposit of TDS on Professional and Technical services is given below:
| When TDS is deducted | When to deposit TDS |
|---|---|
| April - February | On or before 7th of next month |
| March | On or before 30th April |
For example: Tax on Professional and Technical services is deducted on 15th December and needs to be deposited on or before 7th January. Tax on service contract is deducted on 21st March; needs to be deposited on or before 30th April.
| When TDS is deducted | When to deposit TDS |
|---|---|
| April - February | On or before 7th of next month |
| March | On or before 30th April (But the challan is deposited by the 7 day from the end of month of March) |
Following are exempt from tax deduction (TDS) u/s 194J:
Following are the consequences of not deducting the tax or late deduction of the tax which have two-fold consequences u/s 194J TDS on Professional and Technical services:
| Particulars | Penalties |
|---|---|
| Disallowance Of Part Of The Expenditure | 30% of the expenditure shall be disallowed in the year in which the expenditure is claimed (taken to the profit and loss account) – however, the 30% expenditure disallowed shall be re-allowed in the year in which the TDS is paid to the government. |
| TDS is not deducted | If a deductor has not deducted the TDS from the payment of fees for any technical or professional services, it charges interest of @1% per month till the date TDS is deducted. |
| TDS is deducted but not deposited | If a deductor has deducted the TDS from the payment of fees for any technical or professional services but has not deposited the collected tax to the government, then it charges interest @1.5% from the date when tax is deducted to the date of deposition. |
At Bizfoc, we specialize in providing you the best accounting services in filing your TDS for the purchase of property. Here are the reasons why we are known for our services to our clients on filing TDS:
In general, we assist the client to solve their queries and doubts regarding the documentation, procedures, and fees for filling out the form. Other than making your filing successful, we help you make a better decision by covering every aspect of what you actually need to get your TDS.
In conclusion, section 194J of the Income Tax Act covers details of TDS on fees for Professional and Technical services, ensuring that tax from such payments is appropriately deducted and deposited with the government. Compliance with this section is essential for both payer and recipient to avoid penalties and interest.
No, the GST is not included while calculating TDS u/s 194J. TDS would be deducted at the amount excluding the GST component, which exceeds the threshold limit of ₹30,000.
No, the TDS u/s 194J is not applicable on payment to non-residents for any technical or professional service.
Any person (other than individuals and HUF) who is responsible for making payment to a resident for professional or technical services is required to deduct TDS at the rate of 10% or 2% depending upon the services taken of the amount paid.
Individuals and HUFs are required to deduct TDS u/s 194J if last year's turnover was greater than ₹1 crore in the case of business and gross receipts were greater than ₹50 lakhs in the case of profession.
Under Section 194J of the Income Tax Act 1961, the TDS on professional and technical services is deducted when the payer or deductor pays fees for the professional or technical services on amount exceeding the threshold limit of ₹30,000 at the rate of 2% or 10% for technical and professional services, respectively.
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