TDS 194J: TDS on Fees for Professional service or Technical Service.

The concept of TDS confirms regular inflow of tax collection to the government. Deduction of TDS is help collection of tax directly in source of income itself in country. It help to taxpayer simplified their burden on TDS to getting include in return filling of Income Tax at time of paying tax. At time of return filling taxpayer can take the credit of taxes deducted at sources.

TDS 194j under the Income Tax Act deal with TDS charge on services related to professional or technical. In this case a person is liable to charged or deducts a payment part of tax before making the payment to recipient. This section covers accountant, interior designer, architect, doctor, consultant, technician and also people who deal with or associated within advertisement field.

Rate of taxes and its Applicability:

Every person in India other than individual who is liable to paying to a sum to resident in way of –

• Fees for technical services; or
• Related fees for professional services; or
• Royalty; or
• Likewise brokerage, salary or fees, or by any other name, non related to other than those on TDS under section192, a company director; or
• Non-compete fees referred to in section 28(va)

Shall deduct or charged tax at source at the rate –

• Section	Nature of payments	Rate of tax at deduction
  194J	Fees for Technical services	2%
  	Royalty in the nature of consideration for sale, distribution	2%
  	Exhibition of cinematographic films	2%
  	Other cases of payment (like professional services)	10%
  	Who doesn’t furnish his/her PAN	20%

   

   

   

   

   

However, in case of a payee, engaged only in business operation of call centre, the TDS rate will @2%.

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Time of deduction:

Tax deducted at time for-

• Time of credit of sum at account of payee; or
• At time of payment in cash/cheque/draft or by any other mode;

Whichever is earlier

Related to this if any such sum is credited to any account, whether its suspense account or by any other name, in books of account of liable person such crediting is charged or deduct tax accordingly.

Threshold limit

• The deduction of tax at such cases given in following limit criteria-

  If the amount or such sum of fees credited in financial year does not exceed Rs.30000;

  • Aggregate of Rs.30,000 in case of fees for professional services;
  • Aggregate of Rs.30,000 in case of fees for technical services;
  • Aggregate of Rs.30,000 in case of non-compete fees;
  • Aggregate of Rs.30,000 in case of royalty fees;

• The aggregate limit of Rs.30,000 is separately charged under section 194J for fees in professional services, royalty, fees for technical services and non-compete fees referred to in section 28(va).

• For example:

  Like if a liable person receives a service related to professional service of Rs.25500 and technical service of Rs.35850 in financial year, in that case only Rs.35800 charged or deducted at source as tax,

  And tax will not charged or deduct at the combine amount of professional and technical services (25500+35850=61350).

   

  However, there is not such related exemption limit for charged or deduction of tax on any remuneration or fees or commission payable to director of a company.

Shall deduction of rate and separate threshold limit under section 194J for deduction of tax at source:

• Section	Nature of payments	TDS rate	Separate Limit
  194J	Fees for Technical services	2%	Rs.30000
  	Royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films	2%	Rs.30000
  	Other royalty	10%
  	Fees for professional services	10%	Rs.30000
  	Remuneration paid to director	10%	Nil
  	Non-compete fees	10%	Rs.30000

  However, in case of a payee, engaged only in business operation of call centre, the TDS rate will @2%.

Types of payment related to cases:

Payment where residents covered under the section 194J is as follow:

• Technical services fees
• Royalty
• Remuneration paid to director excluding salary
• Professional fees
• Payment of non-compete fees

(Note: Related terms Meaning-

1. Meaning of “Technical services fees”

The term as per under income tax rules “fees for technical services” means any reflection related any lump sum for rendering of any services:

• Technical services
• Managerial services
• Consultancy services
• Provision of service of technical

(Note: Not include consideration:

• Related to construction, assembly, mining or like project; or
• Related charges under head salaries.)

2.Royalty

Related payment for:

• Transfer of rights or usage of any model, machine, design, trademark etc
• Provide information to any related using invention, patent or formulae
• Rights related research paper or information related to literature, films or videotape for broadcasting and scientific data but not include dale, exhibition or distribution of cinematographic films
• Related information to technical, commercial, industrial experienced skills

(Note: As per section 9(1)(vi) in income payable in India which arise or accrue in India)

1. Professional fees

Services related to profession where a service is rendered by a person in way of legal, engineer, medical or accountancy and interior designing, advertising or so on professional;

As notified by CBDT related section 44AA or of the section which follows:

• Film artist;
• Company secretary;
• Authorized representatives;
• Information technology;
• Related position in sports:
  • Sport person
  • Event managers;
  • Coach and trainers
  • Commentators;
  • Sports columnists
  • Umpire and referees; or anchors.

(Not included profession under section 194J such AS painting, teacher, sculpture etc unless they informed)

1. Non-competing fees

A payment in any mode or cash in related to agreement from sharing franchise, commercial or business rights, license or trademark to used elsewhere in trading manufacturing or any other professional services.)