Whenever a person is liable to pay an amount exceeding the specified limit for professional or technical services, he will deduct TDS at specified rates under section 194J.
Who is Liable to Deduct TDS?
Any person, other than in individual or a Hindu Undivided Family, who is responsible for paying to a resident any sum by way of:
Fees for Professional services.
Fees for Technical services.
Any fee or remuneration or commission by whatever name called paid to a director, which is not in the nature of salary
Any amount referred to in clause (va) of Section 28 which relates to non-compete payment. (or)
Any sum shall deduct income tax on income comprised therein.
Any individual or a Hindu undivided family, whose gross receipts, total sales, or professional or turnover from the business carried on by the assessee exceed the monetary limits specified under clause (a) or clause (b) of Section 44AB during the financial year immediately preceding (before) the Financial year in which such sum by way of fees for technical services or professional services is paid or credited, shall also be liable to deduct Income Tax under this Section.
Transactions for which section 194J is applicable
Fees for Professional services
Fees for Technical services
Any remuneration or fees or commission paid to director of a company, other than those which are taxable under section 192.
Sum mentioned in section 28(va) like any sum, whether received or receivable, in cash or kind, under an agreement for—
(a) not carrying out any activity in relation to any business; or
(b) not sharing any know-how, patent, copyright, trademark, license, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services:
Professional services includes profession mentioned in section 44AA
- Architectural profession
- Profession of Accountancy
- Technical consultancy
- Interior decoration
When TDS Under Section 194J is deducted?
TDS under section 194J shall be deducted at the time of credit of such sum to the account of payee or at the time of actual payment, whichever is earlier.
What is the Tax Rate to be Deducted under 194J?
The Tax is Deductible at the Rate of 10% on such income.
No surcharge, education cess/ SHEC shall be added to the rates above. Hence, tax will be TDS at the basic rate.
The rate of Tax Deduction at Source will be 20% in all cases if PAN (Permanent Account Number) is not quoted by the deductee.
What is the Meaning of Professional Fees/ Technical Service/ Royalty?
Professional Services: It means Services rendered by a person in the course of carrying on legal, engineering, medical, architectural profession or the profession of accountancy, 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
Royalty: It means any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”
What is the proof of TDS deducted under section 194J
The deductor (person deduction TDS) will issue TDS certificate to the Deductee in Form No. 16A.
Any Person, who is responsible for paying a resident any sum by the way of fees for professional services for technical services, royalty, non-compete fees referred to in Section 28 director’s fees, shall deduct tax at source.