Professional services and section 194J


What covers under Professional services and deduction under section 194J?


Professional services under section 194J means
Legal Services
Medical Services
Engineering Services
Architectural Services
Accountancy or Technical Consultancy Services
Interior Decoration Services
Advertising Services
Notified Professions (which are related to sports activities; sportspersons, umpires, referees, coaches, trainers, team physicians, physiotherapists, event managers, commentators, anchors, sports columnists)

Section 194J stated that any person who is paying fees to any resident person for specified services, then TDS is required to be deducted u/s 194J.However,TDS is to be deducted when amount of payment in a year exceeds Rs.30,000/- at the rate of 10%.

Rate of Deduction of Tax Under Section 194J

  • Any payment covered under this section shall be subject to TDS at the rate of 10%.
  • From 1 April 2020, the payment of fees for technical service shall be subject to TDS at the rate of 2%.
  • With effect from 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%.
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I think correction is required here.

TDS to be deducted when the amount of single invoice exceeds Rs. 30,000 or total invoicing of financial year is of Rs. 1 lacs.

For example, if you receive invoice for professional services for Rs. 29,000 from your new vendor ABC, you will not deduct TDS as it is the first invoice from this vendor for given financial year. However, if you receive 3 more invoices from same vendor of Rs. 29,000 each, then as 4th invoice crosses the threshold limit of Rs. 1 lacs, you will deduct the TDS when you receive the 4th invoice. TDS will be deducted for all the 4 invoices i.e. for Rs. 1,16,000. I hope it clarifies.

Please also note, software development services, software testing services also comes under section 194J. Thanks.

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