TDS | Deduction of Tax at Source under Section 194J

  • Blog|Income Tax|
  • 4 Min Read
  • By Taxmann
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  • Last Updated on 2 August, 2022

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Table of Content:

1. Introduction – Tax Deducted At Source
2. When is tax required to be deducted?
3. What is the rate of TDS?
4. What is the rate of tax in case of Non-furnishing of PAN?
5. Is there any exemption from deduction of tax?
6. Time limit for issue of TDS certificate
7. What is the time limit for payment?
8. Interest for delay in payment of TDS:
9. How e-TDS Software is Useful for TDS Filing?

Tax deducted at source section 194J

1. Introduction – Tax Deducted At Source:

Tax is deducted at source under Section 194J in respect of following payments made to a resident person:

a) Royalty

b) Fees for Professional services

c) Fees for Technical Services

d) Any remuneration, fees or commission (other than salary) payable to the Director of Company

e) Any sum paid or payable in cash or kind for:

    • Not competing in business or
    • Not sharing any know-how, patent, copyright, trademark, license, franchise or any other business or commercial rights of similar nature
Check out Taxmann's Deduction of Tax at Source with Advance Tax and Refunds which provides legal analysis of the provisions relating to TDS, TCS, Advance Tax and Refunds under the Income-tax Act. It also includes guidance on all practical problems supported by illustrations, case laws, etc.

2. When is tax required to be deducted?

Any person, other than an Individual or HUF, paying the sum (referred to above) to a resident person shall deduct tax therefrom under section 194J.

However, an individual or HUF shall be liable to deduct tax under section 194J if his turnover or gross receipts, during the financial year immediately preceding the financial year in which sum is paid or credited, exceeds Rs. 1 crore in case of business and Rs. 50 lakhs in case of a profession.

The tax has to be deducted at the time of credit of such sum in the account of payee or at the time of payment, whichever is earlier.

3. What is the rate of TDS?

Tax shall be deducted at the rate specified in the following table.

Sr. No. Rate of TDS Nature of sum paid or payable
1. 2% Fees for technical services (not being professional services)
2. 2% Royalty in nature of consideration for sale, distribution or exhibition of cinematographic films
3. 10% Other royalty (other than as referred to above)
4. 10% Fees for professional services
5. 10% Non-compete fees
6. 10% Directors Fees
7. 2% Any of the above if the payee is engaged in the business of operation of call center only

4. What is the rate of tax in case of Non-furnishing of PAN?

If the payee does not furnish his PAN, then tax shall be deducted at the higher of the following rates:
(a) At the rate of 20%
(b) At the rate or rates in force
(c) At the rate specified in the relevant provisions of the Income tax Act

5. Is there any exemption from deduction of tax?

No deduction shall be made under this section, if the sum payable during the financial year does not exceed Rs. 30,000. However, there is no such limit in case of director’s fees.

6. Time limit for issue of TDS certificate:

Every deductor is required to issue Form 16A (in respect of a payment other than salary, from which tax is deducted) to the deductee within 15 days from the due date of furnishing quarterly TDS returns.

Time limit for filing TDS Return (Form 26Q):

Quarter Due date of filing TDS return
April to June 31st July
July to September 31st October
October to December 31st January
January to March 31st May

Disallowance of expense under section 40(a)(ia) due to non-deduction of tax under section 194J: 

TDS default If such expense is deductible in the current previous year If such expense is deductible in any subsequent year
Tax is deductible but has not been deducted 30% of expenditure is disallowed in the current year If tax is deducted in the subsequent year, the expense (which is disallowed in the current year) will be allowed in the year in which TDS is deducted and deposited by the assesse.
Tax is deducted in the current year but is not deposited on or before due date of filing Income-tax return 30% of expenditure is disallowed in the current year If tax is deposited after the due date of filing income-tax return, the expense will be allowed in the financial year of deposit

7. What is the time limit for payment? 

Government Deductor Non-Government Deductor
 

Tax is paid without production of an Income-tax challan on the same day when tax is deducted

 

  

Tax deducted during the month of March shall be deposited by 30th April of the next financial year
 

Tax deducted is required to be deposited through Challan ITNS 281 within 7 days from the end of the month in which tax was deducted

  

Tax deducted is required to be deposited through Challan ITNS 281 within 7 days from the end of the month in which tax was deducted

8. Interest for delay in payment of TDS:

 

If a person fails to deduct tax

  

Interest is levied at the rate of 1% per month or part of the month from the date on which the tax was deductible to the date on which such tax is actually deducted.

 
 

If a person has deducted tax but after deduction has failed to deposit tax

  

Interest is levied at the rate of 1.5% per month or part of the month from the date on which the tax was deducted to the date on which such tax is actually paid.

9. How e-TDS Software is Useful for TDS Filing?

a) User can create Deduction Entry under section 194J by using e-TDS software.

b) Software will auto calculate the amount of TDS on the amount of payment as provided by user.

c) User can file TDS return 26Q using e-TDS software.

d) After entering all the relevant information, user can generate the TDS return.

Dive Deeper:
TDS Under Section 194C | TDS on Payment to Contractor
Guidelines on Deduction of Tax at Source Under Section 194R
FAQs on Tax Payment, TDS and Refund

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

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