Under section 194J of the Income Tax Act 1961, is related to TDS deduction on fees for professional and technical services. Every person excluding and individual or a HUF, making payment to a resident for notified services will be covered under section 194J in the Income Tax Act. However, if the individual or a HUF were liable to get their accounts audited in any case under section 44A or 44AB, they would require to deduct TDS as per the provisions to section 194J.
Payments that are being covered u/s 194J
– Professional Fees
– Fees for Technical Services
– Remuneration paid to the directors other than Salary
– Fees paid for not carrying out any activity in relation to any business or profession.
– Fees paid for not sharing any technical know-how, tread mark, copyright, patent or any other business/commercial rights with the same nature.
Tax Deduction Rate
o Any payment covered under this section shall be subject to TDS at the rate of 10%
o Payment for fees of Technical Services shall be subject to TDS at the rate of 2% (Amendment from 1st April 2020)
o Cases wherein, the payee engaged in the business of the call center operation only, will be subject to TDS at the rate of 2% (Effective from 1st June 2017)
o Professional Royalty where such royalty is in the nature of consideration for sale, distribution, or exhibition of cinematographic film will be subject to TDS at the rate of 10%
o In case of payee fails to furnish PAN, he will be liable to pay TDS at the rate of 20%
Threshold Exemption Limit
In case of payment does not exceed the directed Threshold exemption limits, TDS will not be deductible.
TDS is required to be deducted if the amount of payment in a year exceeds Rs. 30,000.
However, Threshold exemption limit is not available only in the case of Fees / Commission / Remuneration paid to director of the company, other than Salary.