section 194ia
What is Section 194IA
May 7, 2018
Section 40A(2) – Disallowance of Payment made to Relatives
May 8, 2018

Section 194J – TDS on Professional or Technical Services

Last Update Date : August 11, 2018

section 194j

As per section 194J, any person (not being an individual or a Hindu undivided family) is liable to deduct TDS in respect of the following payments made to a resident person:

  • Fees for professional services
  • Fees for technical services
  • Director’s fees (not like salary), or
  • Royalty, or
  • Any sum referred to in clause (va) of section 28 [i.e. non-competence fee]

Meaning of Professional or Technical Service

“Professional services” refers to the 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 including profession of authorised representative, profession of film artist and profession of company secretary. Fees for technical services means fees for rendering any managerial, technical or consultancy services.

When shall Tax be Deducted

Any person (other than an Individual or HUF) who is responsible for paying to a resident any sum (referred to in Section 194J) shall deduct tax

  • Either at the time of payment
  • Or at the time of credit (in any account of payee)

whichever is earlier.

What is the Rate of TDS (with and without PAN)

In cases where the payee furnishes his PAN: As per section 194J tax is to be deducted at the rate of 10%. The surcharge, education cess or SHEC shall not be included in the above tax rates.
However, in case of a person engaged in the business of call centre, tax at the rate of 2% shall be deducted. (Applicability from 1st June 2017)

In cases where the payee does not furnish his PAN, the tax shall be deducted at the higher of the following rates:

  • At the rate or rates in force, i.e., the rate prescribed in the Finance Act.
  • At the rate of 20%.
  • At the rate specified in the relevant provision of the Income-tax Act.

Who Deducts Tax?

Any person (other than an Individual or HUF) paying the sum (referred to above) to a resident person shall deduct tax therefrom under section 194J. An individual or a HUF, whose gross receipts, total sales or turnover from the business or profession carried on by him exceeds the monetary limits specified under section 44AB or if such individual or HUF was liable to get his accounts audited under section 44AB during immediately preceding Financial year, shall be liable to deduct tax under section 194J.

Issuance of TDS Certificate

Form 16A is to be issued by every deductor to the deductee within 15 days from due date of furnishing quarterly TDS return.

Time limit for Payment of Tax Deducted

  • In case of a Government deductor:
    1. In case the tax has to be deposited without income tax challan – Same Day on which tax is deducted
  • In case of Non-Government Deductor:
    1. Tax for the month of March – 30th April
    2. Tax for any other month – 7th Day of the next month of the next month in which tax is deducted.

Consequences

Interest for delay in a deduction of TDS

If a person fails to deduct TDS, then such person is liable to pay interest at the rate of 1% per month from the date on which tax was supposed to be deducted.

Interest for TDS which has been deducted but not deposited

If a person has deducted tax but has failed to deposit tax to the Government, then, interest shall be levied at the rate of 1.5% per month from the date on which the tax was deducted to the date on which such tax is paid to the government.

Late Filing Fees u/s 234E (Penalty)

If the return is not filed then, late filing fees will be levied u/s 234E (Penalty) of Rs 200 per day till the time the delay continues subject to a maximum of total amount of TDS.
Apart from the above mentioned, the other consequence is:

Disallowance of Expenditure

In this scenario, if a person has not deducted TDS while making the payment to the said person or has deducted the payment but failed to deposit the same, then, in this case, the deductor is not allowed to claim a deduction for the said expenditure and the amount will be disallowed u/s 40(a)(ia) under the head “PGBP”

Prosecution (Sec 276B)

As per the Income Tax Act, if any person who deducts the tax at source but fails to deposit it with the government within the time limit, then he may be punishable with imprisonment for a term of minimum 3 months to maximum 7 years including the fine.

Furnishing TDS Return

Every person who has deducted TDS has to file a quarterly return furnishing the details of tax deducted by him to the Government. The due dates for filing the TDS return by a non-Government deductor are given below:

Quarter Due date of filing of TDS return
April to June 31st July
July to September 31st October
October to December 31st January
January to March 31st May

Exemptions to TDS Deduction u/s 194J

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

  • If payment is made by an Individual or Hindu Undivided Family exclusively for personal purposes.
  • No deduction shall be made in cases where the amount that is paid or payable as the professional fee during the financial year does not exceed Rs 30,000. (Such limit is not applicable in case of Director’s fees)

If you have any issues relating to TDS compliance or return filing or if you have more queries to be resolved you can contact the experts at H&R Block.

  • Share: 

Still Have Questions?