:check_mark_button: Reviewed by CA Aditya Chokhra: Last updated 25 June 2026. ICAI-member CA, 15+ years in tax and audit. Figures verified for FY 2026-27.
Section 194J is the TDS rule for fees paid for professional or technical work. The payer cuts 10% on professional fees and 2% on technical fees. It applies once payments to one person cross ₹50,000 in a year. The tax is deposited against the payee’s PAN.
:high_voltage: At a glance
• Professional fees: 10% (Section 194J(b))
• Technical fees: 2% (Section 194J(a))
• Threshold: ₹50,000 per category, per payee, in a year
• Director’s fees: 10% with no threshold
• Deposit by: the 7th of the next month
Not every payer deducts. Most companies and firms do. But an individual or HUF deducts only if their accounts were audited last year. A salaried person paying a consultant from personal money does not deduct. Check your audit status first, then decide.
The section splits into two parts. Part (a) is the 2% list. Part (b) is the 10% list. Pick the rate from the kind of service, not the invoice title.
Payment | Rate | Part |
Professional services (CA, legal, medical, engineering, architecture) | 10% | 194J(b) |
Fees for technical services | 2% | 194J(a) |
Call-centre operator | 2% | 194J(a) |
Royalty for film distribution | 2% | 194J(a) |
Royalty (other) | 10% | 194J(b) |
Non-compete fee (Sec 28(va)) | 10% | 194J(b) |
Director’s fees (non-salary) | 10% | No threshold |
The 10% vs 2% trap: Technical services are taxed at 2%, not 10%. Mixing these up is the most common 194J error. When the contract is unclear, define the service in writing.
Deduct at the earlier of two events. One is when you book the bill in your accounts. The other is when you pay. Whichever comes first sets the date. Then deposit the tax by the 7th of the next month. March deductions get time until 30 April.
A consultant bills you ₹20,000 in April. You cut nothing. You are below ₹50,000. In August they bill ₹40,000 more. The year total is now ₹60,000. You have crossed the limit.
Now the rule bites on the whole ₹60,000, not just the excess. You cut 10%, which is ₹6,000. Of this, ₹2,000 catches up the April bill. The other ₹4,000 is on the August bill. You deduct it all from the August payment.
Cut the TDS when you book or pay the bill, whichever is first.
Deposit it with Challan 281 by the 7th of the next month.
File your quarterly TDS return in Form 26Q.
Download Form 16A from TRACES and give it to the payee.
Taxing the GST part. Cut TDS on the fee value only, not on the GST.
Using 10% for technical work. Technical services are 2%. This single error inflates many filings.
Counting per bill, not per year. Small bills add up. Track the yearly total against ₹50,000.
Skipping director’s sitting fees. These have no threshold. Cut 10% from the first rupee.
Deducting late. Booking the bill but cutting at payment delays the tax and invites interest.
No PAN on file. The rate then jumps to 20%. Collect the PAN before the first payment.
New law from FY 2026-27: The Income-tax Act, 2025 applies from 1 April 2026 and re-codifies TDS. The 10% / 2% rates and the ₹50,000 limit carry over, but section numbers may change. Confirm the current reference before you file.
We map every vendor to the right part of 194J, cut the correct rate, deposit on time, and issue each Form 16A. No 10%-vs-2% slips, no missed thresholds. See our accounting and compliance service, or get a virtual CFO to own the whole TDS calendar.
It is per payee and per category, added up over the financial year. So professional fees to one consultant and technical fees to another are tracked separately. You cross the limit only when one category for one payee passes ₹50,000.
Not if the cost is billed separately and backed by proof. Pure reimbursement is not a fee. But if it is rolled into one composite professional bill, the whole amount is treated as fees and attracts TDS.
Professional work is skill or qualification based, like a CA, lawyer, or architect, and is taxed at 10%. Technical services are managerial, technical, or consultancy services taxed at 2%. When it is borderline, define the scope in the contract so the rate is clear.
Yes. A director’s non-salary fee is covered by 194J at 10%. There is no threshold, so you deduct from the very first payment. This is a frequently missed point.
You pay interest of 1.5% for every month of delay until you deposit it. The related expense can also be disallowed in your own return until the TDS is paid. Depositing by the 7th avoids both.
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