The Section 194J of the Act provided "that any person, not being an individual or a HUF, who is responsible for paying to a resident any sum by way of fees for professional services, or fees for technical services, or any remuneration or fees or commission by whatever name called (other than those on which tax is deductible under section 192 of the Act, to a director), or royalty or any sum referred to in clause (VA) of section 28, shall, at the time of payment or credit of such sum to the account of the payee, deduct an amount equal to ten per cent as income-tax.“
However, it should be noted that, if the gross receipts or sales or turnover of the Individual or a HUF exceeds the monetary limit specified under section 44AB (a) or section 44AB (b), then, they would get covered under section 194J.
List of Notified Services
Every person making payment of the following notified services is required to deduct TDS under section 194J of the Income Tax Act, 1961 –
-Fees for professional services;
-Fees for technical services;
-Royalty;
-Remuneration / fees / commission paid to director of the company (excluding salary);
-Fees paid for not carrying out any activity in relation to any business or profession;
-Fees paid for not sharing any technical know-how, copyright, trademark, patent or any other business or commercial rights of the same nature.
Professional Services - Meaning
The term ‘Professional Services’ means services rendered by a person carrying on –
Legal.
Medical.
Engineering.
Architectural professional.
Chartered Accountant Professional.
Technical consultancy or interior decoration or advertising.
or such other profession as notified by Board for the purpose of section 44AA.
Technical Services - Meaning
=The meaning of the term ‘Fees for technical services’ is the same as that provided in Explanation 2 to section 9 (1) (vii).
=Fees for technical services’ means any consideration for the rendering of any managerial, consultancy, or technical services. It includes the provision of services of technical or other personnel. The term ‘Fees for technical services’ doesn’t include consideration for any construction, mining, assembly or like project undertaken by the recipient or consideration chargeable under the head ‘salary’.
=‘Fees for Royalty’ for patent/copyright / Trademark.
Rate of TDS Deduction
Time to TDS Deduction: The person who is required to deduct TDS under section 194J shall deduct TDS either at the time of credit of sum to the account of the payee or at the time of payment in cash/cheque/draft or any other mode, whichever is earlier.
-The Deductor is required to deduct TDS at the following prescribed rates under section 194J of the Income Tax Act, 1961 –
- New Rate 1.5% and Old Rate 2% - In case of fees for technical services (not being a professional royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of the cinematographic film)
Rate of TDS Deduction
-New Rate 1.5% and Old Rate 2% - Cases, wherein, the payee is engaged in the business of the operation of Call Centre only.
-New Rate 7.5% and Old Rate 10% - Professional royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic film.
-New Rate 7.5% and Old Rate 10% - In case of fees for any other professional services.
-20% - In case the payee fails to furnish PAN.
Threshold Exemption Limit
TDS is not deductible in case the payment doesn’t exceed the prescribed threshold exemption limit. No TDS is to be deducted if the aggregate amount credited/paid during the financial year doesn’t exceed –
-INR 30,000 in case of fees for professional services.
-INR 30,000 in case of fees for technical services.
-INR 30,000 in case of royalty.
-INR 30,000 in case of fees paid for not carrying out any activity in relation to any business or profession.
-INR 30,000 in case of fees paid for not sharing any technical know-how, copyright, trademark, patent or any other business or commercial rights of alike nature
-It should be noted that the threshold exemption limit is not available only in the case of remuneration/fees/commission paid to director of the company (excluding salary).
Views of the readers are welcome in the comment.
Regards
Compiled by CA Sunil Sakral
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