Section 194J

Fees for Professional or

Technical services

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Type of payment covered:

1. Professional fees
2. Fees for technical services
3. Remuneration paid to directors excluding salary (For e.g., sitting fees to attend
board meetings)
4. Royalty
5. Payments in the nature of non-compete fees (i.e., fees paid to not carry on any
business or profession for a specified time and within certain geographical
boundaries) or fees paid to not share any technical knowledge or know-how.
Threshold limit for deducting tax
• Tax has to be deducted in case the payment is greater than Rs. 30,000 during the
year.
• However, there is no such limit for payments made to a director. The tax will have to
be deducted no matter how small the amount.
Persons liable to deduct tax

Every person, who is making a payment in the nature of fees for professional or technical
services is liable to deduct tax at source with the following exceptions:
1. In case of an individual or HUF carrying on business: Where his turnover does not
exceed Rs. 1 crore during the previous financial year.
2. In case of an individual or HUF carrying on profession: Where his turnover does not
exceed Rs. 50 lakh during the previous financial year.
To put it simply, all entities (other than individuals/HUF who are not required to do tax audit in
the preceding year) need to deduct tax.
Rate of deduction of tax

• Any payment covered under this section shall be subject to TDS at the rate of 10%.
• However, w.e.f. 01.04.2017, the tax on payments made to operators of call centres
shall be deducted at a reduced rate of 2%.
• In case the payee does not furnish his PAN then the rate of deduction would be 20%.
Time of deduction

The tax should be deducted -

• at the time of passing such entry in the accounts; or
• making the actual payment of the expense,
- whichever earlier.
Consequences of non-deduction or late
deduction
Not deducting the tax or late deduction of the tax has a two-fold consequence:
1. Disallowance of a part of the expenditure: 30% of the expenditure shall be disallowed in
the year in which the expenditure is claimed (taken to the profit and loss account) –
however, the 30% disallowed shall be re-allowed in the year in which the TDS is paid to the
government.
2. Levy of interest until date of payment: In case there is a delay in the payment of tax,
interest has to be paid along with the TDS to the Government.
 Time limit for deposit
The TDS shall be deposited through Challan No. 281.

Month of deduction Due date for Govt. Due date for Non-Govt.
deductor deductor
April to Feb 7th of the following 7th of the following
month month
March 7th of the following 30th of the following
month month
 Return to be filed:
Due date for filing return

Period Due date for Govt. Due date for Non-Govt.

deductor deductor
April to June 31st July 31st July
July to Sept 31st October 31st October
Oct to Dec 31st January 31st January
Jan to Mar 31st May 31st May
Section 194J – Fees for Professional / Technical Services

Applicability Payer Payee Rate Exemption

• Fees for Any person Resident 10% • Payment of

Professional / [except (2% in professional services
Technical Individual or case of a exclusively for
services HUF not payee personal purposes of
engaged Individuals and HUF
• Remuneration or liable for tax
in the
fees or audit]
business of
commission to call centre • Aggregate payment
Director, other during a FY does not
than salary exceed Rs.30,000
• Royalty
• Non compete
fee
• Non sharing of
intellectual
property (know-
how, patents
copyrights, trade
marks etc.)
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FAQ on 194J
• Payments made to person engaged in business of providing cellular mobile
telephone facility by subscribers, being firms and companies, are not
covered by definition of ‘fees for technical services’ in section 194J, read
with Explanation 2 to section 9(1)(vii) and as such no tax is required to be
deducted at source on such payments by subscribers.
Please refer Skycell Communications Ltd. v. Dy.CIT [2001] 119 TAXMAN 496
(MAD.)

• Whether tax deductible u/s 194J on payment made to a stockist appointed

for sale on commission basis?
Section 194J is not applicable to a stockist appointed by drug
manufacturer for sale of drugs on commission basis. Please refer Piramal
Healthcare Ltd. v. ACIT(TDS) [2012] 21 taxmann.com 225 (Mum.)
FAQ on 194J
• Whether the services rendered by news agencies to newspaper Company shall attract
TDS u/s 194J?
Payments made by newspaper Company to news agencies is liable for deduction of
tax at source under section 1 94J. Please refer ACIT v. Ushodaya Enterprises (P.) Ltd.*
[2012] 23 taxmann.com 258 (Hyd.)

• Whether non resident not having PE in India, making payments to CA, Lawyer, advocate
or solicitor are required to deduct TDS u/s 194J?
Any fees paid through regular banking channel to any Resident – CA, Lawyer,
advocate or solicitor by a Non Resident who do not have any agent of business
connection or permanent establishment in India, may not be subject to the provisions of
tax deduction at source u/s 194J.
FAQ on 194J
• Whether TDS u/s 194J is also deductible on reimbursements?
TDS u/s 194C & 194J refer to any sum paid i.e including reimbursements – applicable only in
cases where bills are raised for the gross amount inclusive of professional fees as well as
reimbursement of actual expenses. Circular No. 715 dated 08/08/1995. Further Circular No.
720 dated 30/8/1995 provides that the provision of sec 194 C &194J is not applicable –
where bills were raised separately by the consultants for reimbursements of actual
expenses incurred by them. ITO vs. Dr. Willmar Schwabe India (P) Ltd (2005) 95 TTJ (Del.)53.
• Where assessee, a non-resident company, set up a liaison office in India in and
appointed consultants – whether tax deductible u/s 192 or 194J?
Where assessee, a non-resident company, set up a liaison office in India in and appointed
six persons as consultants pursuant to agreements, as there was no employer- employee
relationship between assessee company and consultants, case was governed by section 1
94J and not section 192. Please refer Dy CIT v. Coastal Power Co. [2006] 9 SOT 89 (Delhi).
FAQ on 194J
• Whether the services of a regular electrician on contract basis will fall in the ambit of
technical services to attract the provisions of section 194J of the Act? In case the services
of the electrician are provided by a contractor, whether the provisions of section 194C or
194J would be applicable?
The payments made to an electrician or to a contractor who provides the service of
an electrician will be in the nature of payment made in pursuance of a contract for
carrying out any work. Accordingly, provisions of section 194C will apply in such cases.
Please refer Circular No. 715, dated 08/08/1995.
• Whether testing and inspection charges come under the purview of section 194J?
In the case of Bharat Forge Ltd. v. Addl. CIT [2013] 36 taxmann.com 574, the appeal of the
assessee with regard to the tax deduction under section 194C (instead under section 194J)
on payment towards the testing and inspection charges was allowed.
However, it should not be claimed unconditionally that testing and inspection charges fall
under section 194C only, as there may be testing or inspection of a material, etc., which
requires the constant involvement of human beings and comparatively lesser usage of
machines for providing the service, in which case it will be more appropriate to apply the
provisions of section 194J rather than those of section 194C.
FAQ on 194J
Whether payment towards Annual Maintenance Charges (AMC) for software maintenance
is chargeable under section 194C or section 194J?
The annual maintenance charges are covered under section 194C and not under section
194-I.
The CBDT vide Circular No. 715, dated 8th Aug., 1995 [(1995) 127 CTR (St.) 13] made it clear
that routine/normal maintenance contract including supply of spares is covered under
section 194C.
FAQ on Section 194J

• Payment to Non resident for employee secondment as FTS, rejects salary reimbursement
plea~
Where in terms of “secondment agreement” entered into by the assesse with overseas
companies, employees of those companies used their technical knowledge and skills
while assisting assesse in conducting its business of quality control and management, the
amount reimbursed by the assesse to overseas companies towards salaries of seconded
employees amounts to fee for technical services” ~ Centrica India Offshore (P) Ltd v.
CIT[2014], Flughafen Zurich AG [TS-96-ITAT-2017(Bang)]
Contrary ruling –CIT v Mahanagar Gas Ltd [2016] 69 taxmann.com 321(Mum.)

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Section 194LA
Payment of compensation on
acquisition of certain
immovable property

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Who is responsible to Deduct TDS under Section 194LA?

Any person, who is responsible for paying, on or after 1.10.2004, to a resident, any
sum, being in the nature of compensation or the enhanced compensation or the
consideration or the enhanced consideration on account of compulsory
acquisition, under any law for the time being in force, of any immovable property
(other than agricultural land) shall, deduct income-tax thereon.

"Immovable property" means any land (other than agricultural land) or any building
or part of a building.

Provisions of section 194LA apply only when there is compulsory acquisition under
law and, compensation is fixed by statute.

Any local authority by entering into mutual settlement with landowners could not be
equated to compulsory acquisition of land.
When TDS under Section 194LA is to be Deducted:
It will be deducted :
• at the time of payment of such sum in cash or by the issue of a cheque or draft or
• by any other mode,
- whichever is earlier.

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Rate of deduction of tax

• Any payment covered under this section shall be subject to TDS at the
rate of 10%.
• In case the payee does not furnish his PAN then the rate of deduction
would be 20%.
Time of deduction

The tax should be deducted -

• at the time of passing such entry in the accounts; or
• making the actual payment of the expense,
- whichever earlier.
No requirement of TDS in the following cases :

• When the amount (at once or in total for the whole financial year) does not
exceed ₹250000.
• When any payment is made u/s 96 of the Right to Fair Compensation and
Transparency in Land, Acquisition, Rehabilitation and Resettlement Act, 2013.
 Time limit for deposit
The TDS shall be deposited through Challan No. 281.

Month of deduction Due date for Govt. Due date for Non-Govt.
deductor deductor
April to Feb 7th of the following 7th of the following
month month
March 7th of the following 30th of the following
month month
 Return to be filed:
Due date for filing return

Period Due date for Govt. Due date for Non-Govt.

deductor deductor
April to June 31st July 31st July
July to Sept 31st October 31st October
Oct to Dec 31st January 31st January
Jan to Mar 31st May 31st May