Who is required to deduct TDS u/s 194J
Any person (but not an individual or HUF) who pays to a resident fees for professional or technical services, will be required to deduct tax at source u/s 194J.
However, individual or HUF will be required to deduct TDS if they are liable to audit u/s 44AB (a) and (b).
Threshold limit for deducting tax
Tax has to be deducted in case the payment is greater than Rs. 30,000 during the year. However, there is no such limit for payments made to a director. The tax will have to be deducted no matter how small the amount.
Which services are covered
- Professional fees
- Fees for technical services
- Remuneration paid to directors excluding salary (For e.g., sitting fees to attend board meetings)
- Royalty
- Payments in the nature of non-compete fees (i.e., fees paid to not carry on any business or profession for a specified time and within certain geographical boundaries) or fees paid to not share any technical knowledge or know-how.
Rate of deduction of tax
| Particular | Rate of TDS (if PAN available) | Rate of TDS (if PAN not available) |
|---|---|---|
| Payment given to resident person | 10% | 20% |
| Payment given to the business of running only call center | 2% | 20% |
Time of Deduction
The tax should be deducted at the time of-
- Passing such entry in the accounts or
- Making the actual payment of the expense,
whichever earlier.
Exception of section 194J
- 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.
Professional Service includes under 194J
- 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)
Technical Service includes under 194J
- Managerial
- Technical or
- Consultancy services (including the provision of services of technical or other personnel)
but does not include consideration for any
- Construction
- Assembly
- Mining or
- like a project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.