194J – TDS Section Which You Should Be Aware Of

Section 194J of the Income-tax Act, 1961 contains provisions related to the TDS deduction for fees for technical and professional services. 

In this article, we have covered a complete overview of section 194J. It includes the applicability of section 194J, meaning of various services, threshold limit, rate of TDS, and other related updates.

Applicability of section 194J

Applicability – person liable to deduct tax

• Every entity/person responsible for making payments covered under section 194J shall be liable to deduct TDS.
• Individual/HUF covered under section 44AB(a)/44AB(b) are liable to deduct TDS.

Non-applicability – persons not liable to deduct tax

• HUF/individual not falling under 44AB(a)/44AB(b), or 
• HUF/individual makes payment exclusively for personal purposes are not liable to pay TDS. 

Note:

1. Section 44AB(a): Individual or HUF carrying on the business whose total turnover or gross receipts exceeds Rs. 1 crore during the previous FY, 
2. Section 44AB(b): Individual or HUF carrying on the professional whose total gross receipts exceeds Rs. 50 Lakhs during the previous FY.

Payments covered under section 194J

• Fees for professional services, or 
• Fees for technical services, or 
• Any remuneration/fees/commission paid to a director of a company (excluding those covered under section 192), or
• Royalty, or
• Non-compete fees under section 28(Va) 

Rate of TDS deduction under section 194J

Thresh hold limit to deduct TDS under section 194J

• The thresh hold limit for various services covered under section 194J is INR 30000.
• No limit for payment of remuneration/ commission/fees payable to a director of a company

It is to be noted here that limit of Rs. 30000 shall be applicable to one service.

For instance. If the payer makes payment of Rs. 25000 for professional services and Rs. 24000 for technical services. Then, the payer shall not be liable to deduct TDS. 

However, if such an amount exceeds 30000 for professional services, then TDS obligation shall only be on professional services.  

When to deduct TDS under section 194J?

The payer/deductor (who is making payment) is required to deduct TDS at the earliest of the following:

• At the time of crediting the amount to the payee’s account, or
• At the time of payment of the amount to the payee (whether in cash, cheque. draft, or any other mode).

Meaning of professional, technical services, and royalty

Time limit to deposit TDS under section 194J

Consequences of non-deduction of TDS

1. Disallowance of expenses: The person has to disallow 30% of the expense from their PGBP income.
2. Leviability of Interest: In addition of disallowing the expense, the payer shall also be liable for the payment of interest along with the TDS as follows: