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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
- Corporation
- Company
- Cooperative Society
- Trust
- University
- Registered Society
- Firm
- 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).
- 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.
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
| Particulars | Amount |
|---|---|
| Payment made for professional services | Rs. 25,000 |
| Payment made for technical services | Rs. 20,000 |
| Total payment to Mr. A | Rs. 45,000 |
| 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).
| 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% |
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.
Recruitment agencies
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.
Media House
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 :
| Particular | 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 :
| Particulars | Due Date |
|---|---|
| April - June | 31st July |
| July - September | 31st October |
| October-December | 31st January |
| January - March | 31st May |
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 :
| Particulars | Due Date |
|---|---|
| 15th Aug | 31st July |
| July - September | 15th November |
| October - December | 15th February |
| January - March | 15th June |
What are the consequences of non-compliance of section 19C ?
- Levy of Interest : There may be two scenario where interest is levied
Particular 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.
Frequently Asked Questions
Q- If a contract basis employee deducted TDS under 194J, can he/she claim for refund of TDS amount deducted while filing ITR? Which ITR form he/she should fill for that?
Ans. Yes, TDS deducted can be claimed as a refund after considering all his income. ITR Form 3 or 4 can be filed accordingly.
Q- Which ITR form should I fill if my income is both under Sections 192 and 194J? Income under these sections are in different time frames.
Ans. ITR Form4 can be used if 194J receipt is less than Rs. 50 lakhs otherwise ITR 3.
Q- Does the salary received by faculty (on contract) come under 194J?
Ans. It mainly depends on whether there is an employer- employee exists or not.
Q- How much will the TDS company deduct if I do multiple short assignments as a consultant (say a week long assignment comes to 12000 INR and another to 8000 INR)?
Ans. It would be covered under 194J, if the assignment bill exceeds Rs. 30000/- p.a.but in above case total is only Rs. 20000/- so no TDS liability.
Q- Is it compulsory to mention assets like property FDs while filing ITRs, especially when TDS is cut under the 194J section?
Ans. No, it’s not compulsory to mention assets while filing ITR.
Q- How do I know that TDS deducted from my freelancing payment is sent to the income tax department?
Ans. It can be checked by Login into Traces and View your 26AS.
Q- Which ITR should I file when a TDS was made under Section 194J instead of 192?
Ans. ITR 3 or 4 is appropriate to be used as 194J related to professional and technical.
Q- Which ITR should I file for 194J for a salaried employee? Where should it be shown in the ITR return?
Ans. ITR-1 can be filed if any professional services are rendered is not the business of the assessee and it has been rendered casually.
Q- Does Stipend come under Professional Tax 194J?
Ans. No, stipend does not come under professional tax. It may come under 192 subject to few conditions.
Q- What is Section 28(va)?
Section 28(va) includes money 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.
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