TDS Section 194J is seeing renewed attention after the passage of Finance Bill 2020, which includes amendments to Section 194J that took effect on April 1, 2020. Section 194J TDS of the Income Tax Act of 1961 contains rules for deducting TDS on payments for scientific and skilled services.
This article was written to keep you informed about the updates and to give you a comprehensive rundown of Section 194J under TDS. You’ll also find detail on the applicability, TDS rate under Section 194J, and much more here.
TDS will be withdrawn at a rate of 2% in the case of payments for specialized services (not being skilled services) and up to 10% in all other cases under Section 194J.
Individuals or HUFs whose net revenue, gross earnings, or turnover from their company or career surpass Rs 1 crore in the case of a business or Rs 50 lacs in the case of a profession during the Financial year immediately preceding the FY in which such interest is charged or charged are required to deduct TDS. Where Section 44AB has been used, monetary caps would be used instead.
Everyone liable to make the following payments to any resident, except an employee or a HUF, is required to deduct TDS under Section 194J:
For services specified under section 194J of the Income Tax Act, the following rate applies:
|Particulars||Rate of Tax Deducted At Source|
|Royalty is in the nature of consideration for sales, distributions, or exhibitions of cinematographic films||10%|
|Fees for technical services. (the technical fees is not a professional royalty where royalty is in nature consideration for sales, distributions, or exhibitions of the cinematographic films) (which is effective from 1st April 2020)||2%|
|The payee is engaged in business of operation of the Call Centres (effective from 1st June 2017)||2%|
|The payee fails furnish of PAN||20%|
|Fees paid for professional services||10%|
When making the following payments to a citizen in a fiscal year (over Rs.30,000), a person can subtract TDS at a rate of 10%:
It refers to the services provided by someone who works in the medical, architecture, civil, medical, or engineering fields. Accountancy, interior design, advertisement, professional consulting, and any other occupation recognized by the Board under Section 44AA are examples of other facilities.
Film writers, company clerks, and authorized delegates are among the other resources approved under Section 44AA.
It also includes athletes, program organizers, reporters, anchors, umpires and judges, coaches and assistants, physiotherapists, staff doctors, and sports columnists.
It refers to the consulting, technological, or managerial services provided by an employee.
Assemblies, mining, and manufacturing are not considered professional facilities since the money earned falls under the recipient’s head wage.
For Section 194J, non-compete fees refer to the payment paid in cash or kind in exchange for an arrangement prohibiting the individual from exchanging any patent, license, contract, trademark, know-how, commercial or business rights, technique, or information that may be used anywhere for manufacturing, production, or any other provisional operation.
For this section, royalty refers to payment in exchange for:
TDS deduction is also available under Section 194J in the following cases, as determined by the department’s case laws and circulars:
Below are the repercussions of failing to deduct TDS or failing to pay TDS to the income tax authorities after it has been deducted:
You can check your TDS data by getting Form 16 from the deductor or using TRACES or the income tax efiling page to get Form 26AS.
TDS is expected to be deducted from any individual who pays payments to any resident person for listed facilities, according to Section 194J. TDS, however, is to be withheld at a rate of 10% until the volume of payment in a year reaches Rs.30,000/-.
The following are the exceptions to the applicability of section 194J:
If the TDS is excluded under section 194J and the payee’s gross net income for the year is less than the taxable income, the payee can demand a refund of the TDS by filing an income tax return.
Yes, TDS is levied on legal fees if the total sum reaches INR 30,000 in a given fiscal year.