The requirements for Tax Deducted at Source (TDS) on payments made toward fees for various professional and technical services are outlined in Section 194J of the Income Tax Act of 1961. TDS is a part of advance tax deduction, therefore tax under section 194J of Income Tax Act is deducted at the applicable rate before payment for any professional or technical service is completed. In this article information such as TDS on professional fees, TDS on technical services, Due Date for TDS Deposit and Penalty for not deducting TDS is explained.
Section 194J of the Income Tax Act of 1961, in particular, lays out the criteria for tax deducted at source (TDS) on a variety of technical and professional services prices. TDS is deducted at the applicable rate as part of the advance tax deduction before payment for any professional or technical service is finished.
As part of the Finance Bill 2020, Section 194J of the TDS was changed. These are some of them:
Situation |
Government Deductors |
Non-Government Deductors |
If any payment paid before 1st March. |
TDS should be deposited within 7th day from the end of the month. |
TDS should be deposited within 7th day from the end of the month. |
If Payment made in the month of March. |
Tax is paid on the date when professional or technical fees are paid to the payee, but the challan must be deposited by the 7th day after the end of the month of March. |
TDS should be deposited on April 30th. |
Payment received (in cash or in any other form) under an agreement for not engaging in any business activity; or not sharing any know-how, copyright, franchise, Trademark, patent, license, or other business/commercial right of similar nature/ information/ method.
Particulars |
Amount Limit |
TDS Rate |
Remuneration fees |
No Limit |
10% |
Technical Service |
INR 30,000 |
2% |
Professional fees |
INR 30,000 |
10% |
Royalty Fees |
INR 30,000 |
10% |
If a person or corporation receiving services forgets to deduct TDS or makes late TDS payments to the government, Section 194J of the Income Tax Act of 1961 details many penalties that can be applied. The following are some of the possible punishments:
The company or individual must pay the following penalty interest on the due TDS amount if payment is late:
If an individual or organization fails to deduct TDS, 30 percent of their spending for the services obtained for the relevant financial year would be disallowed. In actuality, after deducting and paying TDS to the government on time, a tax assessor can only claim the full tax benefits of expenses.
There are a few exceptions to TDS Section 194J, which are stated below:
Important Note: Section 44AB(a) applied to businesses with a total turnover or gross receipts of more than INR 1 crore in a fiscal year, whereas Section 44AB(b) applied to professionals with a total gross receipts of more than INR 50 lakhs in a fiscal year.
Yes, TDS is excluded up to Rs. 30,000 per year under Section 194J. However, regardless of the amount paid to the director, the payment must be taxed at the current TDS rate.
If the payment for professional or technical services covered by this section exceeds Rs 30,000 per year, TDS is needed to be deducted under Section 194J.
TDS facts can be verified by acquiring Form 16 from deductors or using Form 26AS from the TRACES utility or income tax e-filing website.
The income earned under these sections is distributed across a variety of time periods. If the 194J receipt is less than Rs. 50 lakhs, ITR Form 4 can be filed; otherwise, ITR (Income Tax Return) 3.
If any professional services are supplied that are not the assessee’s business and are done on a casual basis, an ITR-1 form.
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