Written by : Knowledge Center Team
2025-12-12
13714 Views
9 minutes read
Share
Tax Deducted at Source (TDS) serves as a crucial mechanism for the government’s tax collection by directly deducting taxes from the source of income. This system alleviates the taxpayer's responsibility by allowing them to claim credit for the deducted taxes when filing their income tax returns, thus streamlining the tax payment process.
Section 194J is one of the numerous subsections of the Income Tax Act 1961 that addresses Tax Deducted at Source (TDS). It is a highly efficient method of tax collection as it reduces tax evasion. It benefits the government and taxpayers, but applies only to payments made through different professional or technical services.
Key Takeaways
|
What is Section 194J of the Income Tax Act?
Professional and technical service fees are among the most common payments under Section 194J and are further elaborated on in the blog. Paying professional or technical service fees is one of the most significant and frequent payment categories that organisations make. Fees paid to lawyers, doctors, engineers, architects, chartered accountants, interior decorators, advertisers, etc., are some examples of professional fees. The provision of management, technical, or consulting services is included in technical services.
Section 194J of the Income Tax Act covers payroll deduction for technical service providers and professionals. Before payment to the professional or technical service provider, the payer must subtract income tax at the source.
A person is only required to deduct Tax Deducted at Source (TDS) at the rate of 10% for professional services and 2% for technical services when payments are made to a specific resident, as per the guidelines of Section 194J of the Income Tax Act, 1961. The Indian government uses TDS to collect taxes from income sources.
Maximize Your Tax Savings - Talk to an Expert
Enter OTP
An OTP has been sent to your mobile number
Didn’t receive OTP?
Application Status
Name
Date of Birth
Plan Name
Status
Unclaimed Amount of the Policyholder as on
Name of the policy holder
Policy Holder NamePolicy No.
Policy NumberAddress of the Policyholder as per records
AddressUnclaimed Amount
Unclaimed Amount
Sorry ! No records Found
Request Registered
Thank You for submitting the response, will get back with you.
Who is Required to Deduct 194J TDS?
Section 194J mandates the deduction of TDS (Tax Deducted at Source) on payments made for professional and technical services, royalty, non-compete fees, and remuneration to directors (excluding salary). Here’s an overview of who is responsible for making these deductions:
Individuals and Entities Responsible for TDS Deduction:
Section 194J TDS must be deducted by anyone (except individuals not covered under Section 44AB) who makes payments for professional or technical services. This includes:
Government bodies (central or state)
Enterprises (including public sector undertakings)
Cooperative organisations
Universities
Trusts
Businesses across industries
However, individuals are required to deduct TDS only if they are subject to audit under Section 44AA and 44AB in the previous fiscal year.
Specific Professions and Organisations Covered Under This Section:
Section 194J applies to a wide range of specialised services where professional expertise or technical skills are involved. Whether a business hires consultants, technical experts, or creative professionals, this section ensures transparency and accountability in how such payments are taxed.
The section covers various types of services, including:
Professional Services: Medical, legal, architectural, engineering, accountancy, interior decoration, advertising, and technical consultancy services
Technical Services: Consultancy, technical, or managerial services
Other Specific Cases: Medical services in hospitals, professional fees charged by film artists, recruitment agency payments, etc
Additionally, individuals in the following categories are covered:
Film artists, company secretaries, and authorised representatives
Sportspersons, event managers, coaches, and other related professionals
Understanding 194J Threshold Limits for Applicability
The threshold for TDS deduction under Section 194J is tied to the amount of payment made in a fiscal year.
Below are the two key points regarding the threshold limits:
Professional and Technical Fees: Tax must be deducted at source only if the total payment for professional or technical services exceeds ₹30,000 in a financial year. This limit applies to each individual payment or item, not the aggregate sum.
Other Specific Payments: Certain other payments, such as non-compete fees and royalties, do not have a threshold limit. TDS must be deducted even if these payments are below ₹30,000.
Types of Payments Covered Under Section 194J
Section 194J deals with payments that arise from skilled professional work or specialised services. These payments are often part of regular business operations, and the law ensures they are tracked correctly through TDS. Before making any such payment, it’s important to know whether it falls under this section so the correct tax can be deducted. The types of payments to residents covered under this section are as follows:
- Professional Fees TDS Limitations and Inclusions: It covers fees for an individual's medicine, law, architecture, or engineering profession. Accountancy, advertising, interior design, technical consulting, and any other profession as designated by the Central Board of Direct Taxes (CBDT) by Section 44AA are also included.
Under Section 44AA, CBDT has notified the following professions that are liable to pay TDS on professional fees:
- Company secretary-approved representatives and film artists
- Athletes
- Analysts
- Anchors
- Umpires
- Referees
- Physiotherapists
- Trainers
- Coaches
- Team doctors
- Sports columnists
- Technical Services TDS Rate Fees: Fees for Technical Services (FTS) are explained in Section 9. Payments for activities such as assembly, mining, or similar projects carried out by the recipient are not treated as FTS under this definition.
It includes lump sum payments for:
- Services involving technical or technological expertise
- Managerial services, including the operation and management of the client's business
- Consultancy services or advisory services, where clients receive the necessary guidance and assistance for their business
- TDS on Royalty: According to Section 194J of the Income Tax Act, royalty payments given to an individual contemplating the transfer of their copyright, patent, or trademark must include 10% TDS. License fees for utilising a brand name or another person's intellectual property can be referred to as royalty payments.
A royalty is the amount paid for:
- Transfer of ownership or use of a patent, trademark, model, design, innovation, etc
- Utilisation of inventions, patents, designs, etc
- Providing any information about using a recipe, patent, innovation, etc
- Transfer of rights for radio broadcasts about scientific discoveries, literary works, motion pictures, or videotapes does not include payment for the purchase, distribution, or display of motion pictures
Supplying any information regarding expertise, experience, or understanding in the fields of technology, industry, commerce, or science
- Payments such as Non-Compete Clauses: Non-compete fees refer to the payment, either in kind or cash, for an agreement that prevents the other party from disclosing any patent, trademark, franchise, know-how, commercial or business rights, license, or information that might be used for manufacturing, processing, or other temporary services.
194J TDS Rate Limits
Before deducting tax under Section 194J, it is important to understand the applicable rates and thresholds. These limits help you determine how much tax must be withheld when making payments for professional, technical, or specialised services. The table below lists the TDS rate under Section 194J of the Income Tax Act:
| Nature of Payment | Tax Deduction Rate |
|---|---|
| Fee payments for technical services | 2% |
| Fee payments made to call centres | 2% |
| Royalty paid for the sale, distribution, or screening of a film | 2% |
| Other payments | 10% |
| If the payee fails to provide a PAN | 20% |
Time Limit for Deposit of TDS:
Once TDS is deducted, it must be deposited with the government within the prescribed timeline. Timely payment ensures smooth compliance and prevents interest or penalties. The deadlines vary depending on when the deduction is made and the type of deductor involved. The following is an overview of the time limits for government and non-government deductors:
| NPayment Type | Non-Government Deductors | Government Deductors |
|---|---|---|
| Payment made before 1st March | 7th day from the end of the month | 7th day from the end of the month |
| Payment made in March | April 30th | Tax payment is made on the date of the professional or technical fees to the payee. Still, the corresponding challan will be deposited by the 7th day at the end of March. |
Recent Amendments to 194J TDS
Recent amendments to Section 194J of the Income Tax Act have led to significant changes regarding Tax Deductions at Source (TDS) for payments made for professional and technical services. Here’s an overview of the same:
The TDS rate for specialised services, previously classified under skilled professional services, is now set at 2%, while other payments remain at 10%.
Effective FY 2025 - 26, the threshold limit for TDS deduction under Section 194J has been revised from ₹30,000 to ₹50,000 in a financial year. This change provides additional compliance relief for small-scale service transactions.
Additionally, individuals and Hindu Undivided Families (HUFs) must deduct TDS if their turnover exceeds ₹1 crore from business or ₹50 lakh from profession in the prior financial year.
A crucial clarification has been made that payments under this section will not be classified as "work" under Section 194C, effective from October 1, 2024, preventing misapplication of tax provisions.
Consequences of Non-Compliance Under Section 194 J
Failing to follow the TDS rules under Section 194J can lead to financial and legal complications for the deductor. The Income Tax Department treats timely deduction and deposit of TDS as a key part of tax compliance, so any lapses, whether intentional or accidental, can attract penalties, interest charges, or disallowance of expenses. Understanding these consequences helps businesses and professionals stay compliant and avoid unnecessary liabilities.
Non-compliance under Section 194J TDS provision can lead to serious repercussions for businesses and individuals alike, including:
Disallowance of Expenditure:
One of the primary consequences of failing to deduct or pay TDS late is the disallowance of expenses. When an individual or entity claims a business expense requiring a TDS deduction, the failure to deduct TDS will result in a 30% disallowance. This deduction is of the expenditure for the year the expense is claimed for.
However, once the TDS is deducted and paid to the government, the disallowed amount will be reallowed in the year the tax is deposited. This ensures that while the expense is temporarily disallowed, the taxpayer can recover it once compliance is met.
Interest on Deduction Failure:
Interest is another significant consequence of non-compliance, and it can be levied in two scenarios:
Failure to Deduct TDS: If TDS is not deducted when required, interest is charged at 1% per month (or part of the month) from the due date of deduction until the actual date of deduction.
Failure to Pay or Deposit TDS: If TDS is deducted but not deposited with the government on time, the interest rate increases to 1.5% per month (or part of the month) from the date the tax was deducted until the date the payment is made to the government.
Specific Examples:
Example 1: Mr Ravi Consulting Fees for Technical Services
Mr Ravi is a freelance consultant who provides technical services to Mr Suraj, who owns a software company. In the Financial Year (FY) 2024-25, Mr Ravi received two payments for his services: the first payment of ₹65,000 in May and the second payment of ₹27,000 in October.
Let's analyse Mr Suraj’s TDS liability in three scenarios:
Scenario 1: Mr Suraj is not liable for audit u/s 44AB.
Since Mr Suraj is not liable for a tax audit under Section 44AB, there is no requirement to deduct TDS on these payments, regardless of the amount.
Scenario 2: Mr Suraj is liable for audit u/s 44AB, and the services were for personal purposes.
Even though Mr Suraj is liable for a tax audit, the services provided by Mr Ravi were for personal purposes. Therefore, no TDS is required to be deducted from these payments.
Scenario 3: Mr Suraj is liable for audit u/s 44AB, and the services were for business purposes.
Since Mr Suraj is subject to a tax audit, and the services were used for business, total payments (₹92,000) exceed the ₹50,000 threshold.
TDS at 10% must be deducted from the entire amount paid during the year.
TDS calculation:
On ₹65,000, the TDS will be ₹6,500
On ₹27,000, the TDS will be ₹2,700
Example 2: A Film Production Company Hiring a Director
ABC Films is a film production company that hires the renowned director, Mr Kumar, for a project. The director is paid ₹2,50,000 for his services during the production. Since this is a professional service under Section 194J for which the remuneration is more than ₹50,000, TDS must be deducted.
Scenario: ABC Films is liable for tax audit u/s 44AB.
As the services are professional services for business purposes, ABC Films will deduct TDS at 10% on ₹2,50,000, which amounts to ₹25,000. This amount will be deducted and remitted to the government.
In this case, the film production company must comply with TDS provisions, ensuring that the deduction is made on time and the tax is paid to the authorities.
Summing Up
A vital component of the Income Tax Act's regulation of professional service taxation is the Tax Deducted at Source (TDS) method found in Section 194J of the Income Tax Act. Stakeholders can fulfil their tax obligations and support an open and accountable financial environment by being aware of the subtleties of Section 194J. A tax-compliant and financially stable corporate climate is fostered by keeping informed and seeking professional assistance, even as the regulatory environment changes.
FAQs
Section 194J requires TDS on payments for professional, technical, managerial, consultancy services, royalty, and non-compete fees made to resident service providers when payments exceed the specified threshold.
Tax must be deducted only when total professional or technical service payments to a person exceed ₹30,000 in a financial year. This limit applies per payee per year, not per individual payment. From the financial year 2025-26 onwards, the threshold has been increased to ₹50,000.
From April 2025, TDS under Section 194J applies only when total payments to a resident service provider exceed ₹50,000 in a financial year, helping reduce unnecessary deductions for small payments.
TDS under Section 194J must be deducted at whichever point occurs earlier, either when the expense is credited to the service provider’s account or when the actual payment is made.
If the payee's gross net income for the year is less than the taxable income and the TDS is excluded under section 194J, the payee may request a refund of the TDS by filing an income tax return.
Form ITR 4. You can file ITR Form 4 if the 194J receipt is less than ₹50 lakh; otherwise, you should file ITR 3.
If the payee does not furnish a permanent account number, TDS must be deducted at 20%, which is significantly higher than normal rates and can reduce the payee’s actual receipt.
TDS is 2% for technical services and certain royalty payments, 10% for other professional services, and 20% whenever the payee fails to furnish a valid permanent account number.
Advocate fees have a 10% TDS rate, subtracted at the time of payment. If the fees paid to the advocate exceed ₹30,000 in a financial year, TDS is applicable, regardless of whether the advocate is an individual or a Hindu Undivided Family (HUF).
Yes, if you have had excess TDS withheld from your income, you can receive your TDS refund without filing an ITR.
You can claim Section 194J TDS by checking the deducted amount in your Form 26AS or AIS and reporting it in your income tax return to adjust your final tax liability accurately.
To reflect 194J income in your Income Tax Return (ITR), you need to report it under the "Income from Other Sources" section, specifying the payer's details, nature of payment, and the amount received, ensuring compliance with relevant tax regulations.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
Recent Blogs
Will Budget 2026 Allow Joint Taxation for Married Couples?
29 Jan '26
7 Views
8 minute read
Find out what Budget 2026 may introduce on joint taxation for married couples, expected benefits, policy outlook, and how it may impact taxpayers in India.
Read More
Tax Saving
What is Income Tax Return (ITR)? Meaning & Filing Process of Filing ITR
21 Jan '26
4897 Views
10 minute read
Learn what an Income Tax Return (ITR) is, why filing your income tax return is important, and how to file your ITR online via the Income Tax Department. Documents, forms, steps, and FY 2026-27 details included.
Read More
Tax Saving
What Is Advance Tax? How to Calculate Advance Tax and Pay It Online
20 Jan '26
2512 Views
9 minute read
Understand advance tax under income tax, who should pay it, how advance tax is calculated, due dates, and online payment steps to avoid penalties.
Read More
Tax Saving
Importance of Taxes in India: Why Taxes Matter?
15 Jan '26
1608 Views
7 minute read
Understand the importance of taxes in India, how they support public services, economic growth, welfare schemes, and national development.
Read More
Tax Saving
What Is SGST? Meaning, Rates & Applicability Explained
15 Jan '26
626 Views
5 minute read
Learn what SGST means, its full form, tax rates, applicability, and how it works under the GST system for intra-state transactions.
Read More
Tax Saving
What is the GST Council? Role, Members & How It Works
14 Jan '26
537 Views
5 minute read
Understand what the GST Council is, its structure, powers, and how it decides GST rates, laws, and policies across India.
Read More
Tax Saving
Why is Your ITR Refund Delayed and What Can You Do?
13 Jan '26
534 Views
5 minute read
ITR refund delayed? Know the common reasons, timelines, and step-by-step actions to track, raise grievances, and speed up your income tax refund.
Read More
Tax Saving
80CCC: What is Deduction Under Section 80CCC?
11 Jan '26
1179 Views
6 minute read
What is Section 80CCC? How can you claim deductions under section 80CCC? Learn the eligibility criteria to claim a deduction under section 80CCC with a life insurance policy.
Read More
Tax Planning
How to Save Tax on Salary Above ₹15 Lakhs? | Tax Saving Guide 2026
10 Jan '26
4812 Views
14 minute read
Learn how to save tax on salary above ₹15 lakhs using effective tax saving options, deductions, exemptions, and smart income tax planning strategies
Read More
Tax Saving
Tax Savings - Top Selling Plans
We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.
Family Shield: Enhanced Protection
iSelect Smart360 Term Plan
- 3 Plan options
- Life cover till 99 years
- Steady income benefit
- Block your premium at inception
Fixed Returns, Zero Risks & Worries
iSelect Guaranteed Future Plus
- 4 Plan options
- Life cover + Guaranteed benefits
- Accidental death benefit
- Premium protection cover
Start Young, Pay Less, Stay Secured
Young Term Plan
- Life cover till 99 years
- Coverage for spouse
- Block your premium rate
- Covers 40 critical illness