Amendment in Section: -194-J (TDS on Fees for professional or technical services)
Section: -194-J (TDS on Fees for professional or technical services)
As per finance bill 2020, the rate of TDS on payment for the fees of technical services under Section 194J of Income Tax Act has been reduced to 2% from 10%.
The rate of TDS on payment for other professional services except that for technical services remains same at 10%.
Summary of section 194-J of Income Tax Act: –
-
- This amendment is applicable from 01st April 2020.
- Deductor/ Payer: – Any person (Including Individual/HUF if they are liable to audit u/s 44AB)
- Deductee/ Payee: – Resident person
- Rate of TDS: –
| S. No. | Particular | Threshold Limit | Rate of TDS |
|---|---|---|---|
| 1 | Fees for Professional services | > 30000 | 10% |
| 2 | Fees for technical services | > 30000 | 2% |
| 3 | Any remuneration or fees or commission by whatever name called, other than those on which tax is deductible u/s 192, to a director of a company. (e.g. sitting fees paid to attend board meeting) | Any Amount | 10% |
| 4 | Royalty | > 30000 | 10% |
| 5 | any sum referred to in clause (va) of section 28. (e.g. 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.) | > 30000 | 10% |
| 6 | Operator of call centre | > 30000 | 2% |
- Time of deduction: – At the time of credit of amount to the account or payment, whichever is earlier.
- No TDS: –
- No TDS is required to be deducted if sum paid or credited for personal purpose of individual or HUF.
- If payer or deductor is Individual/HUF and they are not labile to audit u/s 44AB.
- Higher Rate of TDS: –
- TDS must be deducted @ 20% on the transaction amount if PAN is not provided by the payee.
Explanation. —For the purposes of this section, —
- “professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA of this section;
- “fees for technical services” shall have the same meaning as in Explanation 2to clause (vii) of sub-section (1) of section 9;
(ba) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;
(c) where any sum referred to in sub-section (1) is credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly.