TDS on Professional Fees & Technical Services: Section 194J and Section 393 Explained
Section 194J of the Income-tax Act has historically played a crucial role in the Tax Deducted at Source (TDS) framework by governing payments made towards professional services, technical services, royalty, and certain other specified sums. With the introduction of the proposed new Income-tax framework, this provision has been repositioned under Section 393(1), Sr. No. 6(iii).
This transition primarily reflects a structural reorganization aimed at simplification and improved accessibility of tax provisions, rather than a substantive change in the underlying principles of taxation.
Scope and Applicability
The provision applies to payments made by any person (other than individuals and HUFs not subject to audit) to a resident for:
a.Professional services
b. Technical services
c. Royalty
d. Director’s remuneration, fees, commission (excluding salary)
The objective is to ensure timely collection of tax at the source on income streams that may otherwise be difficult to track.
Threshold Limits and TDS Rates
Tax is required to be deducted under this provision at the rate of 10% on director’s remuneration (other than salary) without any threshold limit, while for fees for professional services, technical services, and royalty, TDS is applicable only when the aggregate payment exceeds Rs.50,000 in a financial year, with rates of 10% in general cases and 2% in specified cases such as technical services, call centre operations, and certain cinematographic royalty payments.
Quick Summary of Section 393(1), Sr No 6(iii)- Payments towards fees for professional and technical services, etc.
Threshold & Rates of TDS
|
Nature of Expense |
Threshold |
Rate |
|
Remuneration or Fees or Commission to a Director of a Company, Other than those covered by section 192 (Salary) |
Nil |
10% |
|
Fees for Professional Services a. Operation of Call centre |
50000 |
2% |
|
b. Other Cases |
50000 |
10% |
|
Fees for Technical Services |
50000 |
2% |
|
Royalty a. Consideration for sale, distribution or exhibition of cinematographic films |
50000 |
2% |
|
b. Other Royalty Income |
50000 |
10% |
Click here to read Section 393 of the Income Tax Act 2025
Disclaimer: This material and the information contained herein is intended for clients and other Chartered Accountants to provide updates and is not an exhaustive treatment of such subject. We are not, by means of this material, rendering any professional advice or services. It should not be relied upon as the sole basis for any decision which may affect you or your business.
