What is section 194J under the Income Tax Act?
Section 194J stated that any person who is paying fees to any resident person for specified services, then TDS is required to be deducted u/s 194J.However,TDS is to be deducted when amount of payment in a year exceeds Rs.30,000/- at the rate of 10%.
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 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).
Person here means :
- Central or State Government
- Local Authority
- Cooperative Society
- Registered Society
- Individual/HUF/AOP/BOI required to get accounts audited u/s 44AB (a) and (b)
Which services are covered under section 194J?
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).
- 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.
What is the meaning of professional service & technical services ?
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)
Technical services under section 194J means
Any consideration (including any lump sum consi-deration) 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".
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/-.
Now a question may arise in your mind whether this threshold limit is the overall limit for all services covered u/s 194J or it shall be calculated individually for payment of professional fees or technical fees etc?
This limit of Rs. 30,000/- is not a total limit for all services.It shall be calculated individually for payment as professional fees or technical fees or royalty or non-competence fees.
Example 194J applicability : Following payments are made to Mr. A
|Payment made for professional services
|Payment made for technical services
|Total payment to Mr. A
|TDS is not required to be deducted in above case
What is the rate & time of tax deduction u/s 194J?
The rate of tax deduction u/s 194J is 10%.
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).
||Rate of TDS (if PAN available)
||Rate of TDS (if PAN not available)
|Payment given to resident person
|Payment given to the business of running only call center
When is Section 194J not applicable ?
These are the exception 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.
Some Special Considerations by CBDT(Government) Circular on 194J Applicability
CBDT has made some special announcements relating to implications of section 194J which are as follows:
Routine maintenance contracts
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.
TDS Deduction on GST Amount
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 the form of commission) paid by a media house (like TimesNow) to any advertising agency (like FoxyMoron) will be liable to TDS u/s 194J.
What is the time limit to deposit TDS u/s 194J ?
Given below are time limit to deposit the TDS with government :
||Time limit to deposit TDS
|If the amount is paid or credited in the month of March
||On or before 30th April
|If the amount is paid or credited in the month other than March
||Within 7 days from the end of the month is which deduction is made
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 :
|April - June
|July - September
|January - March
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 deducted from the income). Given below are the due dates of issuing TDS certificate :
|July - September
|October - December
|January - March
What are the consequences of non-compliance of section 19C ?
- Levy of Interest : There may be two scenario where interest is levied
||Rate of Interest
|When TDS not deducted
||1% per month or part of the month
|When TDS deducted but not deposited to the government
||1.5% per month or part of the month
- Disallowance of expenses : Also, the person is not eligible to claim the deduction of such expenses from PGBP income if TDS is not deducted on time. The amount of disallowed expenses shall be 30% of payment .
However if TDS is deposited in subsequent years then expense will be allowed in the year of payment of TDS.