As per Section 194J of the Income Tax Act, TDS is to be deducted @ 10% on any amount paid to any resident as:-

  1. Fees for professional services, or
  2. Fees for technical services, or
  3. Royalty, or
  4. Any sum referred in Section 28 (Discussed below)

Exceptions to TDS Deduction under Section 194J

  1. No TDS should be deducted under section 194J if the amount paid or likely to be paid during the financial year does not exceed Rs. 30,000.
  2.  TDS is liable to be deducted by all class of persons except Individuals and HUF. However, if such Individual/HUF is liable to get his tax audit conducted under Section 44AB for the previous financial year, this exception won’t be applicable and they would also be required to deduct TDS under Section 194J.

However, such individual or HUF shall not be liable to deduct TDS on the sum by way of professional or technical services in case such sum is paid exclusively for personal purposes of such individual or any member of HUF.

Sums referred to in section 28

As per Clause (va) of Section 28 (added by the taxation amendment act w.e.f. 13-07-2006), any amount, whether received or receivable, in cash or in kind shall be taxable under the head PGBP, if such payment is 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 etc

Meaning of Professional/ Technical Service for the purpose of Section 194J

Professional Services means 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 or such other profession as is notified by the Board for the purposes of Section 44AA.

Other professions notified by the board for the purposes of Section 44AA are – “profession of authorised representative”, “profession of film artist” and “profession of company secretary”

Fees for Technical Services means fees for any rendering of any managerial, technical or consultancy services (including provision of services of technical or other personnel).

Other Relevant Points regarding Section 194J

  1. Where any sum referred to in this section is credit to any account whether called “suspense account” or by any other name, in the books of accounts of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of section 194J shall apply accordingly.
  2. The person deducting the TDS under Section 194J shall issue a tax credit certificate in Form 16A indicating the amount paid and the TDS deducted thereon.
  3. In case any payment is being made to a person engaged only in the business of operation of call center, TDS would be deducted @ 2% (Introduced in Budget 2017)

Credit of the TDS deducted under section 194J can be claimed at the time of filing of Income Tax Return by the person who has received the payment.