Tax Deducted at Source (TDS) from Fees for Professional Services/Technical Services/Royalty (Section-194J)

1. Who is liable to Deduct TDS under Section 194J

2. No TDS under Section 194J, if fee for professional services is for the personal purposes of the individual or HUF :

3. When TDS under Section 194J is to be Deducted:

4. Rate of TDS under Section 194J for the Financial Year 2018-19 and 2019-20

5. Where No TDS under Section 194J is to be Deducted

6. Where No TDS under Section 194J is to be Deducted or to be Deducted at Lower Rate [Section 194 Rule 28 and 28AA]

7. Meaning of 'Professional Services' [Explanation (a) to Section 194J]

1. Who is liable to Deduct TDS under Section 194J

Any person, other than an individual or a HUF, who is responsible for paying to a resident any sum by way of:—

1. fees for professional, or

2. fees for technical services,

3. any remuneration or fee or commission by whatever name called paid to a director, which is not in the nature of salary,

4. royalty, or

5. any sum referred to in clause (va) of section 28 which relates to non-compete payment for not carrying out any activity in relation to any business or not sharing any know-how, patents copyrights, trade marks, etc.

shall deduct income tax on income comprised therein.

Individuals and HUF who were covered under section 44AB(a) and (b) in the preceding previous year i.e. are also required to deduct tax at source.

2. No TDS under Section 194J, if fee for professional services is for the personal purposes of the individual or HUF :

No individual or Hindu undivided family shall be liable to deduct income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes.

3. When TDS under Section 194J is to be Deducted:

Tax is to be deducted either ..

1. at the time of actual payment of such fees or

2. its credit to the account of the payee

   whichever is earlier.

4. Rate of TDS under Section 194J for the Financial Year 2018-19 and 2019-20

10% on such income.

However, w.e.f. 1.6.2017, in the case of a payee, engaged only in the business of operation of call centre, the rate of TDS shall be 2% instead of 10%.

Notes:

1. No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.

2. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

5. Where No TDS under Section 194J is to be Deducted

No tax is to be deducted where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed—

1. Rs.30,000, in the case of fees for professional services referred to above;

2. Rs.30,000, in the case of fees for technical services referred to above;

3. Rs.30,000, in the case of royalty referred to above;

4. Rs.30,000, in the case of non-compete fee referred to above.

There is no threshold limit for deduction of tax at source in case of payment to director covered under section 194J.

6. Where No TDS under Section 194J is to be Deducted or to be Deducted at Lower Rate [Section 194 Rule 28 and 28AA]

Any person to whom any fee is payable may make an application in Form No. 13 to the Assessing Officer and obtain such certificate from him, as may be appropriate, authorising the payer not to deduct tax or to deduct tax at a lower rate.

As per section 206AA(4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number (PAN) of the applicant.

7. Meaning of 'Professional Services' [Explanation (a) to Section 194J]

The expression “professional services” has been defined to mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising (i.e., models, artists, photographers providing services to an advertising agency) or such other profession as is notified by the Board for the purposes of section 44AA (i.e., authorised representative, film artist or company secretary or information technology) or of this section.

The Board has notified the following persons in relation to the sports activities as “professional services” for the purpose of section 194J namely -

1. sports persons,
2. umpires and referees,
3. coaches and trainers,
4. team physicians and physiotherapists,
5. event managers,
6. commentators,
7. anchors and
8. sports columnists.