TDS on Professional Fees Under Section 194J: Rates and Limits

Section 194J TDS plays a key role in India’s professional and technical services sector. It governs the tax deducted before making payments to consultants and service providers. The net direct tax collection in FY 2025–26 reached ₹23.40 Lakh Crore, with TDS contributing a significant share of the total collections. The threshold limit under Section 194J was increased to ₹50,000 from 1 April 2025.

The TDS filing and compliance framework is also evolving with the implementation of the Income Tax Act, 2025, which replaced the Income‑tax Act, 1961, and came into force on 1 April 2026. This updated guide explains the 194J TDS rate, recent changes, and important compliance considerations for FY 2025–26 and beyond.

What Section 194J TDS Means in 2026

Section 194J TDS can be applied to any specified payment. TDS is deducted from payments made to a resident for any professional or technical service. Any person, except the individual or HUF whose turnover falls below the audit threshold, should deduct tax before releasing the TDS payment.

It includes five types of payment: professional fees, technical services, royalty, non-compete fees and directors' remuneration.

The last update of the provision was in the Union Budget 2025. The cap has been increased from ₹30,000 to ₹50,000 per category for each financial year. The more significant change, however, came on 1 April 2026 when the Income Tax Act 2025 took effect.

New Regime: Section 194J Under the Income Tax Act 2025

With effect from 1 April 2026, all non-salary TDS provisions have been consolidated under Section 393 of the new Act. Further, it is divided into three four-digit numbers used on challans and Form 140 returns.

What the Change Means for Deductors

Under the new Income Tax Act, 2025, TDS reporting shifts to the revised Section 393 framework and related payment codes. Deductors must update vendor masters, ERP, and accounting software to reflect the new codes. The economic rationale of TDS on professional fees and technical services remains unchanged; the primary change is in compliance structure and reporting terminology.

194J TDS Rate and Threshold Limit at a Glance

The core 194J TDS rate structure and threshold logic for FY 2025-26 and FY 2026-27 remain unchanged. The most recent published rates are provided below:

Understanding Professional and Technical Services Under Section 194J

The most common error in TDS under Sec 194J is the misclassification of payment. Applying 2% where 10% is required is an under-deduction and attracts a notice with interest. This risk is heightened under the new Section 393 codes.

• Professional services: Includes Chartered Accountants, Lawyers, Doctors, Architects, Engineers, Company Secretaries, film artists, sportspersons, commentators, and sports columnists.
• Technical services: Managerial, technical, or consultancy services requiring specialised knowledge, such as software maintenance contracts, diagnostics, and call centres. Courts have held that fully automated services without human intervention may not qualify as technical services.

Compliance Calendar and Common Mistakes to Avoid

Three major risks arising from non-compliance with Section 194J TDS are interest under Section 201, late fees under Section 234E, and disallowance of expenses. Below are some important points to remember:

• Deduct TDS at the earliest of credit or payment, not at the time of invoice receipt or on the due date.
• Deposit the deducted tax by the 7th of the following month, and by 30 April for tax deducted in March.
• Exclude GST from the threshold calculation when it is shown separately on the invoice.
• File the applicable quarterly TDS return within the prescribed due dates.
• Use the correct reporting code and payment category while filing TDS returns.
• Issue the TDS certificate to the payee so the tax credit reflects correctly in Form 26AS.

Read More: Section 194Q of Income Tax Act: TDS on Purchase of Goods Explained.

To Conclude

Businesses and deductors should stay updated with the revised TDS reporting requirements introduced under the Income Tax Act, 2025. They must follow the latest CBDT guidelines for smooth compliance after 1 April 2026. Using the correct reporting codes, maintaining accurate records, and filing returns on time can help avoid penalties and compliance issues.

FAQs

Does Section 194J TDS apply to payments made to a non-resident professional?

No, payments to non-resident professionals are covered by Section 195, and the applicable Double Taxation Avoidance Agreement determines the rate.

Can a payee request a lower 194J TDS rate before deduction begins?

Yes, in case of a lower projected tax, the payee can apply to the Assessing Officer for a lower or nil deduction certificate with Form 13.

Is GST charged on an invoice included in the ₹50,000 threshold?

Generally, when GST is shown separately on the invoice, TDS is deducted on the basic value excluding GST, as per CBDT guidelines.

Will using the old Section 194J number on a TDS return after April 2026 cause issues?

Under the Income Tax Act, 2025, deductors may need to use revised reporting codes and updated filing formats for TDS compliance after 1 April 2026, as notified by the CBDT.

Does TDS on technical services apply when a vendor uses fully automated software?

Courts have held that fully automated services without significant human intervention may, in certain cases, not qualify as technical services for TDS purposes.