Section 194J of the Income Tax Act 2020-21 governs the deduction of tax at source (TDS) on professional or technical services. This section applies to all taxpayers who make payments to professionals or technical consultants for their services. The section is significant as it helps the government to keep a track of payments made to professionals or consultants, and also ensures that the taxes due on such payments are duly collected.
Applicability of Section 194J
Section 194J applies to all individuals, firms, companies, and other entities that make payments for professional or technical services. This includes payments made to doctors, lawyers, accountants, architects, engineers, technical consultants, and other professionals.
Under this section, any person responsible for making payments for professional or technical services is required to deduct TDS at a prescribed rate before making the payment. The TDS rate is currently set at 10%.
Definition of Professional or Technical Services
The Income Tax Act 2020-21 provides a broad definition of professional or technical services. These include services provided by:
- Doctors, lawyers, and accountants
- Architects and engineers
- Technical consultants and management consultants
- Film directors, actors, and cameramen
- Music directors and playback singers
- Sportsmen and sports associations
- Authors, playwrights, and editors
- Journalists and cartoonists
The definition of professional or technical services under Section 194J is not exhaustive and may include other categories of services as well.
Exemptions under Section 194J
Section 194J provides for certain exemptions from TDS. These include:
- Payments made to the government, local authorities, or statutory corporations
- Payments made to a person for personal use
- Payments made to a person for non-commercial purposes
- Payments made to a resident individual or Hindu undivided family (HUF) if the total amount of such payments during the financial year does not exceed Rs. 30,000
- Payments made for advertisement in the print media provided the payment is not made to an individual or HUF
- Payments made to acquire software from a resident
It is important to note that these exemptions are subject to certain conditions and limitations.
Complying with Section 194J
To comply with Section 194J, the person responsible for making payments must deduct TDS at the rate of 10% before making the payment. The TDS amount must be deposited with the government within the specified time limit.
The person responsible for deducting TDS must also issue a TDS certificate to the professional or consultant from whom the payment was made. This certificate is proof that TDS has been deducted and deposited with the government.
Penalties for Non-Compliance
Non-compliance with Section 194J can attract penalties and other consequences. If TDS is not deducted or is deducted but not deposited with the government, a penalty may be levied at the rate of 1% per month or part thereof until the tax is paid.
If the TDS certificate is not issued or is issued with incorrect information, a penalty of Rs. 100 per day may be levied until the certificate is issued or corrected.
Conclusion:
Section 194J of the Income Tax Act 2020-21 is an important provision that governs the deduction of TDS on professional or technical services. It applies to all taxpayers who make payments to professionals or consultants for their services. Compliance with this section is necessary to avoid penalties and other consequences.
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Frequently Asked Questions:
Q: What is Section 194J of the Income Tax Act 2020-21?
A: Section 194J of the Income Tax Act 2020-21 is a provision that governs the deduction of tax at source (TDS) on professional or technical services.
Q: To who does Section 194J apply?
A: Section 194J applies to all individuals, firms, companies, and other entities that make payments for professional or technical services.
Q: What is the TDS rate under Section 194J?
A: The TDS rate under Section 194J is currently set at 10%.
Q: What are considered professional or technical services under Section 194J?
A: Professional or technical services under Section 194J include services provided by doctors, lawyers, accountants, architects, engineers, technical consultants, management consultants, film directors, actors, cameramen, music directors, playback singers, sportsmen, sports associations, authors, playwrights, editors, journalists, and cartoonists.
Q: Are there any exemptions from TDS under Section 194J?
A: Yes, there are certain exemptions from TDS under Section 194J. These include payments made to the government, local authorities, or statutory corporations; payments made for personal use or non-commercial purposes; payments made to a resident individual or HUF if the total amount of such payments during the financial year does not exceed Rs. 30,000; payments made for advertisement in the print media, provided the payment is not made to an individual or HUF; and payments made to acquire software from a resident.
Q: What are the penalties for non-compliance with Section 194J?
A: Non-compliance with Section 194J can attract penalties and other consequences. If TDS is not deducted or is deducted but not deposited with the government, a penalty may be levied at the rate of 1% per month or part thereof until the tax is paid. If the TDS certificate is not issued or is issued with incorrect information, a penalty of Rs. 100 per day may be levied until the certificate is issued or corrected.
