Section 194J – Fees for professional or technical services
Table of Contents
What is section 194J – Fees for professional or technical services?
Section 194J contains a provision related to the deduction of tax at source (‘TDS’) from income by way of fees for professional or technical services.
Types of payment covered u/s 194J
The types of payments considered under section 194J are as follows:
- Fees for Professional Services
- Technical services fees
- Payment to the call-center operator
- Director’s fees excluding salary
- Royalty as consideration for sale, distribution, or exhibition of cinematographic films
- Non-compete fees referred to in section 28(va)
Types of payments covered under section 194J are professional fees paid to the lawyer, chartered accountants, architect, advertisers, architect, engineers. Technical services include services relating to technical and consultancy services.
What is the threshold limit for deducting tax u/s 194J
The tax has to be deducted where the amount of aggregate sum credited or paid or likely to be credited or paid during the financial year exceeds Rs 30,000/-.
No threshold limit applies to payment towards the director’s fees.
What is the rate of TDS under section 194J – Fees for professional or technical services?
The rate of TDS u/s 194J is as follows:
| Nature of payment | Up to 13.05.2020 | From 14.05.2020 to 31.03.2021 |
| engaged only in operation of Call-centre (wef 01.06.2017) | 2% | 1.50% |
| Royalty as consideration for sale, distribution or exhibition of cinematographic films | 2% | 1.50% |
| Fees for Technical Service (w.e.f. 01.04.2020) | 2% | 1.50% |
| Director’s fees | 10% | 7.50% |
| Professional fees or any other payment / credited u/s 194J | 10% | 7.50% |
Time of tax deduction u/s 194J
The tax shall be deducted u/s 194J, being earlier of the followings:
- at the time of payment;
- at the time of credit of such income to the account of the payee
Who is liable to deduct TDS under section 194J – Fees for professional or technical services
Any person receiving services falling in section 194J is liable to deduct tax. The only exception is Individual /HUF whose accounts are not liable for tax audit under section 44AB.
Is Individual or HUF not liable to deduct TDS u/s 194J?
Individual / HUF are exempt provided they are not liable to tax audit u/s 44AB
TDS amount exclusive of GST
TDS needs to be deducted excluding the GST component.
Lower / Nil deduction of TDS on Fees for professional or technical services under section 197
The recipient of Income can apply in Form No 13 to the Assessing Officer to get a certificate authorizing the payer to deduct tax at lower or deduct no tax as may be appropriate.
Under what circumstance TDS u/s 194J is not deductible
In the following circumstances TDS requirement u/s 194J is not applicable:
- If the amount of fees for professional and technical services is lower than Rs 30,000/-. No threshold limit applies to the director’s fee.
What is the time limit for depositing TDS?
The time limit for depositing TDS amount to the account of the Government
- Government: The amount needs to be paid on the same day where the payment is made by or on behalf of the Government
- Other than Government:
- Amount paid or credit in March, within next month by 30th April
- Any other case: the amount has to be deposited within the 7th of the next month.
Consequences of non-deduction / non-payment of TDS
Where the person who is required to deduct TDS, does not deduct or does not pay, or after deducting fails to pay the whole or any part of the tax, then such person shall be deemed to be assessee-in-default in respect of tax.
- Delay in deduction: Interest @ 1% per month for the entire period from the date when liability arises till the actual date tax is deducted.
- Delay in deposit: Interest @1.5% per month for the entire period from the date of deduction of TDS to the actual date of deposit.
Further, there is a penal provision for the non-filing of TDS return on time.
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