Applicability of Section 194J and Rate of TDS
Every person other than an individual or a HUF, who is responsible for paying to a resident any sum by way of –
(i) fees for professional services; or
(ii) fees for technical services; or
(iii) any remuneration or fees or commission, by whatever name called, other than those on which tax is deductible under section 192, to a director of a company; or
(iv) royalty, or
(v) non-compete fees referred to in section 28(va)
shall deduct tax at source at the rate of –
(a) 2% in case of fees for technical services (not being professional services) or royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films; and
(b) 10% in other cases.
However, in case of a payee, engaged only in the business of operation of call centre, the tax shall be deducted at source @2%
Summary of rates and threshold limit under section 194J
|S. No.||Nature of Payment||TDS Rate||Limit|
|1||Fees for technical services (not being professional services)||2%||Rs. 30000|
|2||Fees for professional services||10%||Rs. 30000|
|3a||Royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films||2%||Rs. 30000 (Jointly with S. No. 3b)|
|3b||Other Royalty (Limit of Rs. 30000 jointly with Royalty in S. No. 3a)||10%|
|4||Any remuneration or fees or commission, by whatever name called, other than those on which tax is deductible under section 192, to a director of a company||10%||NIL|
|5||Non-compete fees||10%||Rs. 30000|
Time of Deduction
The deduction is to be made at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
Where such sum is credited 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 tax has to be deducted accordingly.
No tax deduction is required if the amount of fees or the aggregate of the amounts of fees credited or paid or likely to be credited or paid during a financial year does not exceed Rs. 30,000 in the case of fees for professional services, Rs. 30,000 in the case of fees for technical services, Rs. 30,000 in the case of royalty and Rs. 30,000 in the case of non-compete fees.
The limit of Rs. 30,000 under section 194J is applicable separately for fees for professional services, fees for technical services, royalty and non-compete fees referred to in section 28(va). It implies that if the payment to a person towards each of the above is less than ` 30,000, no tax is required to be deducted at source, even though the aggregate payment or credit exceeds Rs. 30,000. However, there is no such exemption limit for deduction of tax on any remuneration or fees or commission payable to director of a company.
Non-applicability of TDS under section 194J
(i) An individual or a Hindu undivided family is not liable to deduct tax at source.
However, an individual or HUF, whose total sales, gross receipts or turnover from business or profession carried by him exceeds ` 1 crore in case of business or ` 50 lakhs in case of profession in the financial year immediately preceding the financial year in which the fees for professional services or fees for technical services is credited or paid is required to deduct tax on such fees.
(ii) Further, an individual or Hindu Undivided Family, shall not be liable to deduct income-tax on the sum payable by way of fees for professional services, in case such sum is credited or paid exclusively for personal purposes.
Meaning of “Professional services”
“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 CBDT for the purposes of section 44AA or of this section.
Other professions notified for the purposes of section 44AA are as follows:
(a) Profession of “authorised representatives”;
(b) Profession of “film artist”;
(c) Profession of “company secretary”;
(d) Profession of “information technology”.
The CBDT has notified the services rendered by following persons in relation to the sports activities as Professional Services for the purpose of the section 194J:
(a) Sports Persons,
(b) Umpires and Referees,
(c) Coaches and Trainers,
(d) Team Physicians and Physiotherapists,
(e) Event Managers,
(g) Anchors and
(h) Sports Columnists.
Accordingly, the requirement of TDS as per section 194J would apply to all the aforesaid professions. The term “profession”, as such, is of a very wide import. However, the term has been defined in this section exhaustively. For the purposes of TDS, therefore, all other professions would be outside the scope of section 194J. For example, this section will not apply to professions of teaching, sculpture, painting etc. unless they are notified.
Meaning of “Fees for technical services”
The term ‘fees for technical services’ means any consideration (including any lump sum consideration) for rendering of any of the following services:
(i) Managerial services;
(ii) Technical services;
(iii) Consultancy services;
(iv) Provision of services of technical or other personnel.
It is expressly provided that the term ‘fees for technical services’ will not include following types of consideration:
(i) Consideration for any construction, assembly, mining or like project, or
(ii) Consideration which is chargeable under the head ‘Salaries’.
Latest Case Laws on Section 194J