Section 194J: TDS on Fees for Professional or Technical Services

You must have always wondered that how much money does a Doctor or a CA or a Lawyer earns? Must be in double-figure of lacs (after all they are counted as one of the most reputed professions).

Today we’ll tell how provisions of tax deduction (TDS) becomes applicable to them and this brings us to the Section 194J.

As this provision of TDS hits millions of people around India, hence it needs proper as well as in-depth discussion as follows:

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 the following types of income, will be required to deduct tax at source u/s 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 as mentioned u/s 28(va)

However, individual or HUF will be required to deduct TDS if they are liable to audit u/s 44AB (a) and (b).

What is Professional Service?

Income Tax Act, 1961 defines professional services as one which includes:

  • 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 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.

What is the rate & time of tax deduction u/s 194J?

The rate of tax deduction u/s 194J is 10%. But in case the payee (i.e. the receiver) is in the business of running only call center then TDS rate will be 2%. 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).

No TDS in Following Situations :

  • Where the amount of payment (at one time or in total during the whole financial year) does not exceed ?30000. This limit shall be calculated individually for payment as professional fees or technical fees or royalty or Section 28(va).
  • Where the payment made by individual or HUF is for personal purpose only.

Some Special Clarifications by Government

  • 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 etc) will be liable to TDS u/s 194J.
  • 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 form of commission) paid by a media house (like TimesNow) to any advertising agency (like FoxyMoron) will be liable to TDS u/s 194J.

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 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 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 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 income tax department?

Ans. It can 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 show in the ITR return?

Ans. ITR-1 can be filed if any professional services is rendered is not the business of the assessee and it has been rendered casually.

Q- Does Stipend comes under Professional Tax 194J?

Ans. No, stipend does not comes under professional tax. It may come under 192 once few conditions satisfied.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.