194j

Table of Contents • • • • Professional Services Vs. Technical Services U/s 194J of Income Tax Act, 1961 This analysis has assumed great importance due to the amendment of section 194J by the Finance Act, 2020 with effect from 1st April 2020. In nutshell, after the amendment, the TDS rate on fees for “professional services” is 10% and in respect of “fees for technical services” (not being a professional service) has been reduced to 2%. Now the moot question is that in which situation this concessional rate will be applicable. As per Explanation to Section 194J of the Income Tax Act, 1961: “Professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (Other professions as notified u/s 44AA are as Authorized Representative, Film Artist, Company Secretary, and Information Technology). It may be noted that no profession has been notified separately for the purpose of section 194J. “Fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; As per this clause, “fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including t...

Section 194J of the Income-tax Act, 1961 deals with TDS deduction on fees for professional or technical services. The prescribed persons are required to deduct TDS @10% or 2%, as per the case may be when the payment amount exceeds Rs. 30,000. In this article, we have added Everything you need to know – Section 194J. Types of payments covered under section 194J Section 194J covers the following types of payments: • Fees for professional services • Fees for technical services • Royalty • Remuneration paid to the directors except for salary • Non-compete fees, i.e., fees paid not to carry on any business or profession or not share any technical knowledge, patent, license, copyright, know-how, or any other similar nature payment. Read more: Meaning of professional and technical services under section 194J Professional services Legal, Medical, Architectural, Engineering , Interior decoration, Accountancy or technical consultancy, Advertising Other notified persons related to sports (event managers, coaches, commentators, anchors, trainers, referees, sportsperson, physicians, physiotherapists, , sports columnists) Technical services Managerial, Technical, Consultancy services, or Provision of technical services or other personnel (excluding construction, assembly, mining or any other consideration which is in nature of income chargeable under head “salaries” Who deducts TDS under section 194J? Section 194J prescribes that every person making payments (As specified) are liable to...

As per Section 194J of the Income Tax Act, TDS is to be deducted @ 10% on any amount paid to any resident as:- • Fees for professional services, or • Fees for technical services, or • Royalty, or • Any sum referred in Section 28 (Discussed below) Exceptions to TDS Deduction under Section 194J • No TDS should be deducted under section 194J if the amount paid or likely to be paid during the financial year does not exceed Rs. 30,000. • TDS is liable to be deducted by all class of persons except Individuals and HUF . However, if such Individual/HUF is liable to get his for the previous financial year, this exception won’t be applicable and they would also be required to deduct TDS under Section 194J . However, such individual or HUF shall not be liable to deduct TDS on the sum by way of professional or technical services in case such sum is paid exclusively for personal purposes of such individual or any member of Sums referred to in section 28 As per Clause (va) of Section 28 (added by the taxation amendment act w.e.f. 13-07-2006), any amount, whether received or receivable, in cash or in kind shall be taxable under the head PGBP, if such payment is under an agreement for:- • Not carrying out any activity in relation to any business; or • Not sharing any know-how, patent, copyright, trademark, license, franchise etc Meaning of Professional/ Technical Service for the purpose of Section 194J Professional Services means services rendered by a person in the course of carrying on ...

1. Who is liable to deduct TDS u/s 194J? Every person other than an individual/HUF who is liable to make the following payments to any resident is liable to deduct TDS u/s 194J: • • Any remuneration/fees/commission whatever name called to a director of a company other than the payment on which tax is deductible u/s 192 or • Royalty or • Non-compete fees u/s 28(va) *Individual/HUF falling under the scope of section 44AB are included. The meaning of Professional Services under Section 194J include: • Medical, legal, engineering, or architectural profession, accountancy, technical consultancy, or interior decoration. • Professional services notified in section 44AA - The profession of film artist - The profession of authorized representative - The profession of Company Secretary • Professional Services rendered in relation to sports activities notified by CBDT for section 194J - Sports Persons - Referees and Umpires - Trainers and Coaches - Commentators - Anchors - Sports Columnists - Event Managers - Physiotherapists Meaning of fees for technical services: Payment made for any of the following services are covered under the meaning of fees for technical services: - Technical services - Managerial services - Consultancy Services - Provision of services of technical or other personnel 2. At what rate TDS is deducted under TDS Section 194J? TDS under section 194J is deducted at the following rates: Category Rate Payee engaged only in the business of the operation of call center...

As per Union Budget 2020, the TDS rate for the payment of fees for technical services under Section 194J of Income Tax Act has been reduced to 2% from 10%. The TDS rate for the payment other professional services except that for technical services remains same at 10%. This change in TDS rate will come in effect from 1 st April, 2020. Section 194J of the Income Tax Act, 1961 specifies the rules related to Tax Deducted at Source (TDS) on payments made towards fees for various professional and technical services. TDS mechanism forms a part of advance tax deduction, and thus tax u/s 194J is deducted at the applicable rate prior to completion of payment for any professional or technical service. The following are some additional details about Section 194J of the IT Act, 1961. Table of Contents : • • • • • • • Which Payments are subject to TDS under Section 194J? Section 194J deals with TDS deduction on payments made for availing professional and technical services. The payments considered under this section are: • Fees for professional services in the fields of medicine, architecture, law or engineering. • Fees for technical services provided by consultants, technical consultants, managers, etc. • Royalty payments in lieu of literary works, scientific findings, inventions, patents, etc. • Remunerations made to a company director (excluding salary) • Payments made in the nature of non-compete fees i.e. fees paid for purposes other than hiring for a project or consultation such a...

Table of Contents • • • • • • • • • • • • • • Meaning and applicability of Section 194J – TDS – Professional, Technical Fees Section 194J – TDS – Professional, Technical Fees- Any person who is paying fees to any resident person for specified services, then TDS is required to be deducted u/s 194J @ 10% if such payment in a year exceeds Rs 30,000. See Who is liable to deduct TDS (Deductor)? • Central government or state government • Local authority • Corporation • Company • Co-operative society • Trust • University • Registered Society • Firm • Individual/HUF/AOP/BOI required to get accounts audited u/s 44AB Which services are covered under this section? • Professional services. • Technical services • Remuneration or fee or commission to a director of a company (which is not liable to TDS u/s 192). • Royalty • Non-competence fees. What is the meaning of Professional services? • Legal services • Medical services • Engineering services • Architectural services • Accounting services • Interior decoration services • Advertising services • Notified professions like sports activities; sportspersons, umpires, referees, coaches, trainers, team physicians, physiotherapists, event managers, commentators, anchors, sports columnists Related Topic: What is the meaning of Technical services? Includes: • Managerial • Technical • Consultancy services Excludes: • Construction • Assembly • Mining Is there any limit up to which no TDS is required to be deducted? No TDS is required to be deduc...