As per the Finance Act 2020, the following are some of the amendments which are being made in section 194J of the Income-tax Act,1961 i.e. TDS on Technical and Profession services and are effective from 1st April 2020.
Person liable to deduct TDS u/s 194J
Every person except individual or Hindu Undivided Family who making the following payments to a resident is responsible to deduct TDS u/s 194J:
Fees for professional services include following..
Medical, legal, engineering, or architectural profession, accountancy, technical consultancy, or interior decoration.
Professional services as notified under section 44aa, Film artists, authorized representatives, company secretary.
Professional services provided in relation to sports activities as notified by CBDT for the purpose of section 194J, Referees, umpires, sports persons, commentators, Trainers, coaches, Anchors, Event managers, Physiotherapists Managerial services- Consultancy services- Provision of services of technical or other personnel or
Fees for technical services including managerial, consultancy services, provision of services of technical or other personnel or
Any fees/commission/remuneration whatever name called to the director of a company other than salary.
Individual/HUF falling under the scope of section 44AB are included.
Rate of TDS under section 194J
Rate of TDS under section 194J shall be as follow:
If payee engaged in the business of call center then TDS to be deducted at the rate of 2%
If payee engaged in any other business or profession then TDS shall be deducted at the rate of 10%
If PAN number is not provided by the payee then TDS at the rate of 20% is required to be deducted.
Time of deduction of TDS under section 194J
TDS under Section 194J of the Income Tax is to be deducted at the time of:
Credit of such amount to the account of the payee or
Payment of such amount to the payee in cash/cheque/draft/any other mode, whichever is earlier.
Threshold limit for Deduction of TDS u/s 194 J
Threshold limit for deduction of TDS under section 194J is Rs. 30000/-
However fees/commission/Remuneration paid to the director of a company then there is no such limit applicable.
Non Applicability of Section 194J
Section 194J is not applicable in the following cases, if the payment is done by Individual or Huf. However, if the Individual or Huf falls under:-
Section 44AB(a) or 44AB(b) then TDS is required to be deducted.
It is important to note that if the payment is made by Individual or Huf exclusively for personal purpose then No TDS is required to be deducted by them under this section.
Amendments by Finance Bill 2020 in section 194J
As per the Finance Bill 2020, the following amendments have been made in TDS Section 194J which will take effect from 1/04/2020:
-The rate at which TDS will be deducted under section 194J will be 2% in case of fees for technical services (not being professional services) and 10% of such sum in any other case.
– Individual/HUF, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed 1 crore rupee in case of business or Rs 50 lacs in case of the profession during the FY immediately preceding the FY in which such interest is credited or paid, shall be liable to deduct TDS.
Also Read: TDS on Rent, Section 194 I