Section 194J of the Income Tax Act requires the deduction of tax at source on professional or technical services. This section applies to payments made to a resident individual, Hindu Undivided Family (HUF), partnership firm, Limited Liability Partnership (LLP), or private limited company. In this blog post, we will discuss Section 194J in detail.
What is Section 194J?
Section 194J mandates that the payer should deduct TDS at the rate of 10% on payments made to professionals or technical service providers. The section applies to a wide range of services, including legal services, accounting services, medical services, technical consultancy, and engineering services, among others.
Who is liable to deduct TDS under Section 194J?
Any person making payment to a resident individual, HUF, partnership firm, LLP, or private limited company for professional or technical services is required to deduct TDS under Section 194J. The provision is not applicable if the payment is made to a non-resident.
What is the TDS rate under Section 194J?
The TDS rate under Section 194J is 10% of the gross amount of the payment. If the professional or technical service provider has provided a valid PAN, the TDS rate will be 10%; if the PAN is not available, the TDS rate will be 20%.
What is the threshold limit for TDS under Section 194J?
The threshold limit for TDS under Section 194J is Rs. 30,000 in a financial year. If the payment made to the professional or technical service provider is less than Rs. 30,000 in a financial year, TDS is not required to be deducted.
What are the compliance requirements under Section 194J?
The compliance requirements under Section 194J include obtaining a Tax Deduction and Collection Account Number (TAN) and deducting TDS at the applicable rate. The TDS deducted must be deposited with the government by the 7th of the following month. The deductor is also required to file TDS returns in Form 26Q quarterly.
What are the penalties for non-compliance with Section 194J?
Non-compliance with Section 194J can lead to penalties and interest charges. If the payer fails to deduct TDS or deducts TDS at a lower rate than prescribed, then he/she will be liable to pay interest at the rate of 1% per month or part of the month on the amount of TDS not deducted. Additionally, a penalty may be imposed for non-compliance.
Is there any exemption from TDS under Section 194J?
There are no exemptions available from TDS under Section 194J. However, if the professional or technical service provider is a resident senior citizen and the amount of payment does not exceed Rs. 50,000 in a financial year, the TDS is not required to be deducted.
Section 194J of the Income Tax Act is a provision that has significant implications for businesses that engage in professional or technical services. In this blog post, we will delve deeper into the nuances of this section to help businesses understand its provisions and comply with its requirements.
Applicability of Section 194J
Section 194J applies to payments made to a resident individual, HUF, partnership firm, LLP, or a private limited company for professional or technical services. The term ‘professional or technical services’ covers a broad range of services, including legal services, medical services, technical consultancy, engineering services, and accounting services, among others.
TDS rate under Section 194J
The TDS rate under Section 194J is 10% on the gross amount of the payment. However, if the professional or technical service provider has not provided a valid PAN, the TDS rate will be 20%. It is important to note that the TDS rate under this section is higher than the rate under Section 194C, which is applicable to payments made to contractors.
Threshold limit for TDS under Section 194J
The threshold limit for TDS under Section 194J is Rs. 30,000 in a financial year. If the payment made to the professional or technical service provider is less than Rs. 30,000 in a financial year, TDS is not required to be deducted. However, if the payment exceeds this limit, TDS must be deducted on the entire amount, and not just the amount exceeding the threshold limit.
Compliance requirements under Section 194J
The compliance requirements under Section 194J include obtaining a Tax Deduction and Collection Account Number (TAN) and deducting TDS at the applicable rate. The TDS deducted must be deposited with the government by the 7th of the following month. The deductor is also required to file TDS returns in Form 26Q quarterly. It is important to note that non-compliance with these requirements can lead to penalties and interest charges.
Exemptions from TDS under Section 194J
There are no exemptions available from TDS under Section 194J, except for the exemption available for resident senior citizens if the amount of payment does not exceed Rs. 50,000 in a financial year.
Penalties for non-compliance with Section 194J
Non-compliance with Section 194J can lead to penalties and interest charges. If the payer fails to deduct TDS or deducts TDS at a lower rate than prescribed, then he/she will be liable to pay interest at the rate of 1% per month or part of the month on the amount of TDS not deducted. Additionally, a penalty may be imposed for non-compliance.
Other Useful Links: Section 194IB of Income Tax Act
Conclusion
Section 194J is an important provision under the Income Tax Act that applies to a wide range of professional and technical services. The provision ensures that the tax on such payments is collected at the source and deposited with the government. It is important for deductors to comply with the provisions of the section to avoid penalties and interest charges.
Frequently Asked Questions About Section 194J
Q: What types of services are covered under Section 194J of the Income Tax Act?
Section 194J covers professional or technical services, which include legal services, medical services, technical consultancy, engineering services, accounting services, and other similar services.
Q: Who is required to deduct TDS under Section 194J?
The person making the payment for professional or technical services is required to deduct TDS under Section 194J.
Q: What is the TDS rate under Section 194J?
The TDS rate under Section 194J is 10% of the gross amount of the payment. However, if the professional or technical service provider has not provided a valid PAN, the TDS rate will be 20%.
Q: What is the threshold limit for TDS under Section 194J?
The threshold limit for TDS under Section 194J is Rs. 30,000 in a financial year. If the payment made to the professional or technical service provider is less than Rs. 30,000 in a financial year, TDS is not required to be deducted.
Q: What are the compliance requirements under Section 194J?
The compliance requirements under Section 194J include obtaining a TAN, deducting TDS at the applicable rate, depositing the TDS to the government by the 7th of the following month, and filing TDS returns in Form 26Q quarterly.
Q: Are there any exemptions from TDS under Section 194J?
There are no exemptions available from TDS under Section 194J, except for the exemption available for resident senior citizens if the amount of payment does not exceed Rs. 50,000 in a financial year.
Q: What are the penalties for non-compliance with Section 194J?
Non-compliance with Section 194J can lead to interest charges and penalties. If the payer fails to deduct TDS or deducts TDS at a lower rate than prescribed, then he/she will be liable to pay interest at the rate of 1% per month or part of the month on the amount of TDS not deducted. Additionally, a penalty may be imposed for non-compliance.
