Any Person, who is responsible for paying a resident any sum by the way of fees for professional services for technical services, royalty, non-compete fees referred to in Section 28 or (w.e.f 1st July 2012) director’s fees, shall deduct tax at source.
As per Section 194J of the Income Tax Act, any person who is responsible for paying to a resident any sum by way of fees for professional services, technical services fees, royalty, non-compete fee, directors fee, shall TDS at 10%.
Who is Liable to Deduct TDS?
Any person, other than in individual or a Hindu Undivided Family, who is responsible for paying to a resident any sum by way of:
- Fees for Professional services.
- Fees for Technical services.
- Any fee or remuneration or commission by whatever name called paid to a director, which is not in the nature of salary (with effect from 1-7-2012).
- Any amount referred to in clause (va) of Section 28 which relates to non-compete payment. (or)
- Any sum shall deduct income tax on income comprised therein.
- Any individual or a Hindu undivided family, whose gross receipts, total sales, or professional or turnover from the business carried on by the assessee exceed the monetary limits specified under clause (a) or clause (b) of Section 44AB during the financial year immediately preceding (before) the Financial year in which such sum by way of fees for technical services or professional services is paid or credited, shall also be liable to deduct Income Tax under this Section.
What are Provisions under Section 194J?
|Whether tax is deductible under Section 194J||During 1st July 1665 to 31st May 2002||During 1st June 2002 to 31st May 2003||From 1st June 2003 onwards|
|When deductor or payer is a person other than an individual or Hindu Undivided Family (HUF).||Yes||Yes||Yes|
When deductor or payer is an individual or HUF (Hindu Undivided Family), and books of account of the payer are required to be audited in the immediately preceding year (under Section 44AB (a)/(b)):
|When deductor or Payer is an HUF or an individual and books of accounts of the payer are not required to be audited (under Section 44AB (a)/(b)) in the immediately preceding year||No||No||No|
FAQ’s Related to TDS on Professional Fees
At What Rate Tax to be Deducted under 194J?
The Tax is Deductible at the Rate of 10% on such income.
- No surcharge, education cess/ SHEC shall be added to the rates above. Hence, tax will be TDS at the basic rate.
- The rate of Tax Deduction at Source will be 20% in all cases if PAN (Permanent Account Number) is not quoted by the deductee on or after 1/4/2010.
What is the Meaning of Professional Fees/ Technical Service/ Royalty?
Professional Services: It means Services rendered by a person in the course of carrying on legal, engineering, medical, architectural profession or the profession of accountancy, technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA. or of this Section;
Royalty: It means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for:
- The transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property;
- The imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property;
- The use of any patent, invention, model, design, secret formula or process or trade mark or similar property;
- The imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill;
- The use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB.
- The transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or
- The rendering of any services in connection with the activities referred to in sub-clauses (1) to (4), (4(1)) and (5).
If a Company Pays Professional Fees of Rs. 20000/- to Mr.X and Rs. 25000/- for Technical charges. Is the Company liable to deduct TDS Under Section 194J?
As per one of the CA Expert if the amount is paid to the same in the same financial year and if the amount exceeds Rs. 30,000/- then it is liable to deduct Tax Collected at Source (TDS). The Rate of TDS under Section 194J is at the Rate of 10%. If at all not satisfied with this answer consult your CA expert and clarify your Doubt.