Section 194J – TDS on Professional & Technical Fees: Rates, Thresholds & GST Impact (FY 2025–26 Guide)

Payments to professionals, consultants, doctors, CAs, lawyers, IT service providers, and technical experts are subject to TDS under Section 194J.

This section is one of the most litigated TDS provisions because:

• Wrong classification (194C vs 194J)

• Incorrect TDS rate

• GST inclusion errors

• PAN-related defaults

This WonderTax guide explains Section 194J clearly with examples, so both deductors and professionals remain compliant.

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What Is Section 194J?

Section 194J mandates deduction of TDS on payments made for:

• Professional services

• Technical services

• Royalty

• Non-compete fees

• Director remuneration (other than salary)

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Who Is Required to Deduct TDS Under Section 194J?

⚠️ Individuals/HUFs not liable to tax audit are not required to deduct TDS under Section 194J.

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Threshold Limit Under Section 194J (FY 2025–26)

TDS applies only if aggregate payment exceeds ₹30,000 per financial year, per payee.

👉 If total annual fees ≤ ₹30,000 → No TDS.

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TDS Rates Under Section 194J

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What Qualifies as Professional Services?

Includes services rendered by:

• Chartered Accountants

• Doctors

• Lawyers

• Engineers

• Architects

• Company Secretaries

• Consultants

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What Qualifies as Technical Services?

• IT services

• Software support

• Data processing

• Technical consultancy

• System maintenance

⚠️ Misclassification between 194C & 194J is a major notice trigger.

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GST Impact on Section 194J (Very Important)

Key Rule

If GST is shown separately in the invoice:

• TDS is deducted only on base fees

• GST is excluded from TDS

Example

• Professional fee: ₹1,00,000

• GST @18%: ₹18,000

👉 TDS @10% on ₹1,00,000 = ₹10,000
👉 GST not subject to TDS

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Example 1: CA Professional Fees

• CA fees paid: ₹1,20,000

• GST charged separately

👉 TDS @10% = ₹12,000
👉 Net payment = ₹1,08,000 + GST

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Example 2: IT Technical Services

• Software maintenance fees: ₹80,000

👉 TDS @2% = ₹1,600
👉 Net payment = ₹78,400

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When Should TDS Be Deducted & Deposited?

• Deduction: At credit or payment, whichever is earlier

• Deposit: By 7th of next month

• Return: Form 26Q (Quarterly)

• Certificate: Form 16A

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Common Mistakes Under Section 194J

• Applying 194C instead of 194J

• Deducting TDS on GST amount

• Ignoring director remuneration

• Missing threshold calculation

• PAN mismatch leading to higher TDS

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Interest & Penalty for Non-Compliance

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FAQs (Schema-Ready)

Is Section 194J applicable to freelancers?

Yes, if they provide professional or technical services.

Is TDS applicable on reimbursement of expenses?

If reimbursed without markup and supported by bills, TDS may not apply.

Does Section 194J apply to directors?

Yes, for non-salary payments.

Can excess TDS be refunded?

Yes, by claiming credit in ITR.

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Internal Links (WonderTax)

• TDS Return Filing Services
  https://wondertax.in/tds-return-filing

• Freelancer & Consultant Tax Guide
  https://wondertax.in/freelancer-tax

• Income Tax Notice Handling
  https://wondertax.in/services/income-tax-notice-handling

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Conclusion

Section 194J is critical for professional & technical payments. Small errors can lead to:

• High interest costs

• Penalties

• TDS notices

Proper classification, rate selection, and GST treatment are essential.

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CTA – WonderTax

👉 Confused between Section 194J vs 194C or facing TDS notices?

WonderTax helps with:

• Correct TDS classification

• Monthly & quarterly TDS compliance

• TDS return filing & corrections

• Notice handling

🔗 https://wondertax.in