ALL ABOUT TDS UNDER SECTION 194J

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TDS under Section 194J has been one of the most talked about and puzzling things. However, is it really that puzzling or just tedious? Let us find out.

Section 194J of the Income Tax Act of 1961, states that the Deductor should deduct TDS on professional fees paid by him to a resident exceeding Rs. 30,000/-.

Deductor

Deductorof TDS on professional fees is a person (other than individual or HUF who is not liable to audit under section 44AB) who is paying to resident:

  • Fees for Professional Services

  • Fees for Technical Services

  • Non-compete fee

  • Royalty

  • Any remuneration or fees or commission that is paid to the director, other than those which is payable as salary, has also been included in section 194J after amendment in the Financial bill in the year 2012.

Deductee

  • Deductee is the person who is providing any professional services(not being the services exclusively excluded) to another person. He will get his professional fee after the deduction of TDS from it by the Deductor.

RATE OF TDS

TDS is to be deducted under this section at the rate of 10%. If the recipient of income doesn’t furnish his PAN to deductor then TDS is to be deducted @ 20%. No surcharge, education cess or SHEC shall be added to the mentioned rates. Also TDS is to be deducted on fees excluding the GST component.

From 1st June 2017 TDS is to be deducted at the rate of 2% where the payee is engaged only in business of operation of call center.

Tax is to be deducted at the time of credit of such income to the account of the payee or at the time of payment whichever is earlier.

Exemption

TDS on Professional Fees is not required to be deducted in the following cases:

  • If payment is made by an Individual or Hindu Undivided Family (HUF) exclusively for personal purposes.

  • If the assessee has applied to the Assessing Officer for no TDS or TDS at a lower rate u/s 197.

  • No tax is required to be deducted where the amount that is paid or payable as the professional fee during the financial year does not exceed Rs. 30,000/-.

That is all we had to share about TDS under Section 194J. Do you have more questions related to TDS under Section 194J? Are you looking for a CA in Bangalore? If yes, then feel free to reach out to us.

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