TDS Under Section 194J — Professional and Technical Services Fees

Section 194J of the Income Tax Act requires TDS on fees for professional services and technical services paid to resident persons. This is one of the most widely applicable TDS sections — affecting businesses that engage lawyers, chartered accountants, consultants, architects, doctors and technology service providers. Here is the complete guide.

Who Must Deduct TDS Under Section 194J?

Any person (other than individuals and HUFs below the tax audit threshold) who pays the following to a resident must deduct TDS under 194J:

• Fees for Professional Services
• Fees for Technical Services
• Royalty
• Non-compete fees
• Remuneration to directors (other than salary — i.e., sitting fees, commission)

What is "Professional Services"?

Professional services means services by a person engaged in the profession of legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising, film/TV production, notary — or any other notified profession. CA firms, law firms, doctors, engineers, architects, and management consultants all fall here.

What is "Technical Services"?

Technical services means managerial, technical or consultancy services (not including construction, assembly, mining or like activities). Software development services, IT support, business process outsourcing, and technical consulting fall under this category.

TDS Rates Under Section 194J (After 2020 Amendment)

• 10% TDS: Fees for professional services, royalty, non-compete fees, director remuneration
• 2% TDS: Fees for technical services (other than professional services), fees for operation of call centres
• If PAN not provided: 20% TDS

The 2020 amendment reduced the rate for technical services from 10% to 2% — aligned with the TDS rate for most government works contracts. The professional services rate remains 10%.

Threshold Limit

• TDS required only if aggregate payments under 194J to a single person exceed ₹30,000 per year
• Exception: No threshold for director remuneration — any amount is subject to 194J TDS

Conclusion

Section 194J TDS applies to a wide range of service payments — from CA fees to IT services to director sitting fees. Correct classification (professional vs technical) determines the applicable rate. SPOTON manages complete 194J TDS compliance for businesses across Kerala. Contact us for expert TDS management services.