A Comprehensive Guide on Section 194J of the Income Tax Act

Section 194J of the Income Tax Act focuses on provisions regarding TDS deduction by a payer while making payments to a resident individual for providing specified technical and professional services. This article contains essential information regarding this Section. Hence, individuals curious to know about it must keep reading!

Who Is Responsible for Deducting TDS as Per Section 194J?

A person, except for Hindu Undivided Family and individuals, paying fees for receiving technical and professional services, is responsible for deducting TDS while making payments.

Persons here denote the following:

Local authority
Central or State Governments
Corporation
Cooperative Society
University
Trust
Registered Society
Firm
Company

What Are the Payment Types Covered Under Section 194J?

The type of payments that Section 194J of the Income Tax Act covers are as follows:

Fees for professional and technical services
Remuneration to directors excluding salary
Royalty
Payments received in mind or cash for –

Not conducting any business activity

Not sharing patent, know-how, copyright, licence, trademark or any other commercial right of similar type

What Does Professional & Technical Services Mean in Section 194J?

Professional and technical services under Section 194J denotes the following services:

Professional Services Under Section 194J Means

Medical

Legal

Architectural

Engineering

Technical consultancy services or accountancy

Advertising

Interior decoration

Notified Professions; covering sports activities like referees, umpires, sportspersons, trainers, coaches, physiotherapists, team physicians, commentators, event managers, sports columnists, anchors

Technical Services Under Section 194J Means

Technical

Managerial

Consultancy (including technical or other personnel rendering services)

However, technical services under Section 194J does not include the following:

Assembly

Construction

Mining

A project where an individual receiving income as salary

What Is the Maximum Payment Limit to Deduct TDS Under Section 194J?

The maximum payment limit should be above ₹ 30,000 in a financial year for TDS to be deducted. Note that this payment limit for deducting TDS is computed individually for technical and professional, non-competence and royalty fees. For example-

Mr. Alok receives payment of ₹ 20,000 and ₹ 25,000 for providing professional and technical services, respectively, then the aggregate payment is as follows:

Particulars	Amount
Payment received for providing professional services	₹ 20,000
Payment received for providing technical services	₹ 25,000
Aggregate payment made to Mr Alok	₹ 45,000

In this case, the deductor will not deduct tax at source while making payments as each payment made for respective services does not exceed ₹ 30,000.

Additionally, note that there is no threshold limit for payment made to directors for TDS to be deducted from such payments.

What Is the TDS Rate as Per Section 194J?

Here is the rate at which a payer deducts TDS while making payments for technical and professional services under Section 194J:

Particulars	TDS Rates
Royalty in nature of distributions, sales, and exhibitions of cinematographic films and fees for professional services	10%
Fees paid for technical services and payee associated with the business of operating call centres	2%
A payee who does not provide PAN	20%

When Is TDS Deducted According to Section 194J?

A payee shall deduct TDS at any of the following times:

The credit of payments to the payee’s account
Actual payments in a cheque, draft, cash or other payment modes

When Is Section 194J of the Income Tax Act Not Applicable?

There are a few exceptional circumstances when Section 194J is not applicable:

Hindu Undivided Families and individuals making payments to meet their personal purposes
A payer pays to non-resident sub-contractor and contractor
The single or total amount paid in a financial year is not above ₹ 30,000

What Is the Time Limit to Deposit TDS as Per Section 194J?

Deductor must deposit TDS within the following deadlines mentioned below:

Non-Government Taxpayers

Particulars	Due Dates for TDS Payment
The amount is transferred or paid in March	On or before 30th April
The amount is credited or paid other than March	Within 7 days from the completion of the month in which the payer deducted TDS

Government Taxpayers

Particulars	Due Dates for TDS Payment
A deductor needs to deposit TDS without using challan	The same day on which TDS has been deducted
A payer needs to deposit TDS using challan	7th day of the subsequent month

In specific cases, a deductor can deduct TDS in a quarter of a financial year given the approval of an Assessing Officer.

What Are the Due Dates to File Tax Return as Per Section 194J?

A deductor, after depositing TDS, needs to fill Form 26Q for filing quarterly return of TDS within the following due dates:

Particulars	Due Dates for TDS Return Filing
April to June	31st July
July to September	31st October
October to December	31st January
January to March	31st May

When Does a Deductor Issue TDS Statement Under Section 194J?

A deductor issues Form 16A to the payee or deductee within the following due dates:

Particulars	Dues Dates to Issue TDS Certificate
April -June	15th August
July to September	15th November
October to December	15th February
January to March	31st May

Consequences of Late or Non-Deduction of TDS Under Section 194J

Individuals not deducting or delaying in deducting TDS from payments can face the following consequences:

1. Interest Till the Payment Date

In case of late TDS payment to the Government, deductors have to pay interests along with TDS. The interest rate is as follows:

Non-deduction of Tax - 1% of interest is chargeable every or part of the month. This is levied from the date on which TDS was to be deducted up to the actual date of deduction.
Non-payment of TDS to the Government - 1.5% of interest is chargeable every or part of the month. This is calculated from the date on which the deductor deducted TDS up to the payment date.

2. Disallowance on Expenses

The Government disallows individuals to claim 30% of expenses in a financial year when a payer claims such expenditure as a deduction. However, the Government re-allows individuals to claim this 30% in a fiscal year when they pay TDS to the Government within the due date.

Knowing about Section 194J of the Income Tax Act will assist taxpayers to deduct and deposit TDS within time to avoid paying additional interests and increase tax liabilities.

Frequently Asked Questions

✓ Is TDS deduction applicable on the GST amount under Section 194J?

Yes, a deductor can deduct TDS on the amount by removing GST if the GST amount is furnished separately on a bill.

✓ Can Hindu Undivided Families and individuals deduct TDS while making payments under Section 194J?

No, if a Hindu Undivided Family or an individual who carries out a business and the turnover in a previous fiscal year is not above ₹ 1 crore, they cannot deduct TDS as per Section 194J. Additionally, an individual or HUF carrying out a profession and the turnover is not above ₹ 50 lakhs in the preceding fiscal year cannot deduct TDS.