Section 194J of the Income Tax Act, 1961 mandates Tax Deducted at Source (TDS) on payments made towards certain professional and technical services. It ensures early tax collection and tracking of high-value service income.
Applicability – Why This Section Applies
This section is applicable to payments made for:
➡️ Professional services
➡️ Technical services
➡️ Royalty
➡️ Non-compete fees
➡️ Remuneration or fees to directors (not in the nature of salary)
✅ Applicable to both residents and domestic service providers (excluding payments made to non-residents – governed by Section 195).
Who is Liable to Deduct TDS?
TDS under Section 194J must be deducted by:
✔️ Companies
✔️Firms
✔️LLPs
✔️Trusts
✔️AOPs/BOIs
✔️Individuals/HUFs liable to tax audit under Section 44AB
🚫 Exemption: Individuals or HUFs not covered under tax audit in the preceding FY are not liable to deduct TDS under this section.
Nature of Payments Covered
1. Professional Services :- Legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, IT, film writing, etc.
2. Technical Services:- Managerial, consultancy, or technical services (not professional)
3. Royalty :- Payments for use of patents, trademarks, copyrights, etc.
4. Non-compete Fees:- Payments to not engage in a similar business
5. Director Remuneration (non-salary):- Board/committee meeting fees, consultancy, etc. paid to directors
Threshold Limit
TDS is to be deducted only if the total payment in a financial year exceeds ₹50,000 per payee under each nature of payment.
📌 Increased from ₹30,000 to ₹50,000 w.e.f. 1st April 2025 (Finance Act, 2025 Amendment)
Time of Deduction
TDS is to be deducted at the earlier of:
🔹 Credit of such amount to the account of the payee (including suspense account), or
🔹Actual payment in cash, cheque, draft, or any other mode
⚠️ Consequences of Non-Compliance
1. Disallowance of expense u/s 40(a)(ia) – 30% of such expense is disallowed.
2. Interest liability for late deduction or non-payment u/s 201.
3. Penalty and prosecution in case of willful default.
📑 Deposit and Reporting Requirements
✅ Due date for TDS deposit:
Within 7 days from the end of the month in which deduction is made.
For March: Before 30th April.
✅TDS Return (Form 26Q):
Quarterly filing is mandatory (Apr–Jun, Jul–Sep, Oct–Dec, Jan–Mar).
✅TDS Certificate (Form 16A):
To be issued to payee within 15 days from the due date of filing TDS return.
Applicable TDS Rates
