TUTORIAL ON TDS- PART-05 TDS ON PROFESSIONAL AND TECHNICAL SERVICES

In my series of tutorial videos on TDS, till now I have covered 4 major sections which are most relevant for NGOs and are usually very confusing for them too. I hope I had been able to explain them well and must have brought a lot of clarity on TDS deduction under those sections. Today I will take you through a detailed analysis and understanding of Section 194J - TDS on Professional and Technical Services.

What makes Section 194J different from other sections but very similar to Section 194I which we discussed about in our earlier video, is that in Section 194J too, there are two rates of TDS which depend on the nature of services.

So, first let's see what does Section 194J says.

(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of—
(a) fees for professional services, or
(b) fees for technical services, or
(ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or
(c) royalty, or
(d) any sum referred to in clause (va) of section 28
shall, at the time of credit of such sum 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, deduct an amount equal to 55[two per cent of such sum in case of fees for technical services (not being a professional services) or royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films and ten per cent of such sum in other cases,] as income-tax on income comprised therein.

Before moving onto the topic further, let's analyse few important aspects from the above provision.

i) At the time of credit of such sum to the account of contractor implies that once the invoice is entered in the books of accounts and the contractor is credited, TDS have to be deducted irrespective of whether payment is made or not.



ii) It's then mentioned "or at the time of payment, whichever is earlier" which implies that even if advance payment is made to the contractor, irrespective of whether the invoice is given or not, TDS have to be deducted on each such advance payment, if the amount shall cross the specified threshold limit on final payment.

iii)The section clearly lists out the nature of payment on which TDS under Section 194J shall be applicable.

iv)It's evident that there are two rates of TDS based on the nature of payment.

2% for technical services and specific nature of royalty and;
10% on rest of the services listed out in the Section.

Please note that the legal status of payee shall not affect the rate of deduction.


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