What is Section 194J under Income Tax Act?


In this part, we’ll take up Section 194J, the most important provision of TDS for Professional & Technical Services that is as follows –


Section 194J: TDS on Fees for Professional or Technical Services

You must have always wondered that how much money does a Doctor or a CA or a Lawyer earns? Must be in double-figure of lacs (after all they are counted as one of the most reputed professions).

Today we’ll tell how provisions of tax deduction (TDS) becomes applicable to them and this brings us to the Section 194J.

As this provision of TDS hits millions of people around India, hence it needs proper as well as in-depth discussion as follows:


  • Who is required to deduct TDS u/s 194J?

As per this section, any person (but not an individual or HUF) who pays to a resident the following types of income, will be required to deduct tax at source u/s 194J.

  • Fees for professional service,
  • Fees for technical service,
  • Remuneration or fee or commission to a director of a company (which is not liable to TDS u/s 192).
  • Royalty
  • Payment as mentioned u/s 28(va)

However, individual or HUF will be required to deduct TDS if they are liable to audit u/s 44AB (a) and (b).


  • What is Professional Service?

Income Tax Act, 1961 defines professional services as one which includes:

  • Legal Services
  • Medical Services
  • Engineering Services
  • Architectural Services
  • Accountancy or Technical Consultancy Services
  • Interior Decoration Services
  • Advertising Services
  • Notified Professions (which are related to sports activities; sportspersons, umpires, referees, coaches, trainers, team physicians, physiotherapists, event managers, commentators, anchors, sports columnists)

  • What is Section 28(va)?

Section 28(va) includes money received (in cash or kind) 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 or any other business/ commercial right of similar nature/ information/ technique.

  • What is the rate & time of tax deduction u/s 194J?

The rate of tax deduction u/s 194J is 10%. But in case the payee (i.e. the receiver) is in the business of running only call center then TDS rate will be 2%.

And the time of deduction is earlier of, the credit of income to the account of the payee (receiver) or actual payment (in cash, cheque, draft or other modes).


  • No TDS in Following Situations :

  • Where the amount of payment (at one time or in total during the whole financial year) does not exceed ₹30000. This limit shall be calculated individually for payment as professional fees or technical fees or royalty or Section 28(va).
  • Where the payment made by individual or HUF is for personal purpose only.

  • Some Special Clarifications by Government :

  • Any payment made for routine maintenance contracts (including the supply of spares) will be liable to TDS u/s 194C. But if such payment is made for giving any technical services then Section 194J will become applicable.

  • Any payment made to recruitment agencies (like Monster India or Naukri.com etc) will be liable to TDS u/s 194J.

  • The TDS under this section will be applicable on the amount (excluding GST) only if the GST value is shown separately on the bill.

  • Any payment (in form of commission) paid by a media house (like TimesNow) to any advertising agency (like FoxyMoron) will be liable to TDS u/s 194J.

Author


Team Tax2Win