The primary Tax Deducted at Source (TDS) rate under Section 194J of the Income Tax Act for various specified services is 10%. This section mandates TDS deduction on payments made to resident individuals or entities for professional or technical services, royalty, and certain other fees.
Understanding TDS under Section 194J
Section 194J of the Income Tax Act deals with the deduction of TDS on fees for professional or technical services. It ensures that tax is deducted at the source when payments are made for specific services, thereby facilitating tax collection. This section broadly covers payments for:
- Professional Services: This includes services rendered by a person in the course of carrying on legal, medical, engineering, architectural profession, accountancy, technical consultancy, interior decoration, advertising, or other notified professions.
- Technical Services: Payments for managerial, technical, or consultancy services are covered here.
- Royalty: Payments for the use of patents, inventions, copyrights, trademarks, designs, processes, or similar property.
- Non-compete Fees: Sums paid for not carrying out any business or profession, or not sharing any know-how, patent, copyright, trademark, etc.
- Director's Remuneration: Any remuneration or fees paid to a director of a company, other than salary.
For more detailed information on Section 194J, you can refer to reputable sources like the Income Tax Department of India.
Primary TDS Rate and Conditions
For payments made by an individual to a resident person for listed facilities, the TDS rate under Section 194J is 10%. Notably, TDS is to be withheld at this 10% rate until the payment volume in a financial year reaches Rs. 30,000/-.
It's important to note that the applicability of TDS and its rates can vary based on the specific nature of services and the status of the payee or deductor.
Other Applicable Rates
While the predominant rate under Section 194J is 10%, there are specific instances where a different rate of 2% applies. This rate typically covers:
- Fees for professional services in the case of a business of operating call centers.
- Fees for technical services (in certain specific cases as per the Income Tax Act, though generally 10%).
- Fees for professional services by certain film artists or sports persons.
Key Aspects of Section 194J
To ensure compliance with Section 194J, it's essential to be aware of the following:
- PAN Card Requirement: If the payee does not furnish their Permanent Account Number (PAN), TDS will be deducted at a higher rate of 20%.
- Time of Deduction: TDS under Section 194J must be deducted at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
- No TDS for Personal Use: Individuals and Hindu Undivided Families (HUFs) are not required to deduct TDS if the payments are made exclusively for personal purposes.
In summary, the core TDS rate under Section 194J for many professional and technical services, royalty, and director's fees is 10%, with specific conditions and thresholds governing its application.
