Fees for professional or technical services

What is the nature of payment covered under section 194J?

As per section 194J deals with the deduction of tax at source (TDS) on fees for professional or technical services.

According to Section 194J, any person (other than an individual or a Hindu Undivided Family) making payment to a resident for professional or technical services is required to deduct TDS.

Who is deductor for section 194J?

As per this section, any person (other than an individual or HUF who are not covered u\s 44AB in the preceding FY) who pays fees to resident for professional or technical services, will be required to deduct tax at source u/s 194J.

The following persons required to deduct TDS u/s 194J

Central or State Government
Local Authority
Corporation
Company
Cooperative Society
Trust
University
Registered Society
Firm
Individual/HUF/AOP/BOI must get accounts audited u/s 44AB (a) and (b)

What are the services covered under section 194J ?

The following type of services are covered under section 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 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.

 

Read Also : TDS on consideration on transfer of immovable properties

 

Describe the term professional service & technical services?

Technical services under section 194J means

Any consideration (including any lump sum consideration) for the rendering of any

i) Managerial
ii) Technical or
iii) Consultancy services (including the provision of services of technical or other personnel)

but does not include consideration for any

i) Construction
ii) Assembly
iii) Mining or
iv) like a project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.

Professional services under section 194J means

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 the point of time for deduction of TDS under section 194J?

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).

What is the limit to deduct TDS u/s 194J?

• TDS is required to be deducted if the amount of payment in a year exceeds Rs. 30,000/-.
• This limit of Rs. 30,000/- is not a total limit for all services. It shall be calculated individually for payment as professional fees, technical fees, royalty fees, or non-competence fees.

What is rate of TDS under section 194J?

2% in case of fees for technical services (not being professional services) or royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films

10% in other cases

However, in case of a payee, engaged only in the business of operation of call center, the tax shall be deducted at source at 2%.

If payee not furnished his PAN then, rate of TDS is 20% applicable.

In which cases section 194J is not applicable under Income Tax ?

These are the exceptions to Section 194J applicability:

Where the payment made by an individual or HUF is for personal purposes only.
If payment is made to a non-resident contractor or sub-contractor.
Where the amount of payment (at one time or in total during the whole financial year) does not exceed Rs. 30000.
No TDS by individual\HUF on royalty and non compete fees( even if commercial).

 

Read Also : Section 194-IB – TDS on Rent of Property

 

What is the time limit to deposit TDS u/s 194J?

Given below are the time limit to deposit the TDS with the government:

What is the time limit to file TDS return u/s 194J?

After depositing TDS to the government, quarterly TDS return in form 26Q is also required to be filed. Given below are the due dates:

When is the TDS Statement issued and by whom u/s 194J?

TDS statement, known as Form 16A is issued by the specified person who is required to deduct TDS. Form 16A is issued to the deductee (i.e., whose TDS is deducted from the income). Given below are the due dates of issuing the TDS certificate: