TDS on Professional Fees: Section 194J Explained

Section 194J requires TDS deduction on payments for professional or technical services once the payment (or aggregate payments in a year) exceeds ₹30,000 to a single payee — but the rate you deduct depends on which category the payment falls into.

Rate Breakdown

• 10% — Professional services (legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration)
• 2% — Technical services (fees for technical services, not professional services), and payments to a call-centre operator
• 2% — Royalty for sale, distribution, or exhibition of cinematographic films

The Distinction That Trips People Up

"Professional services" and "technical services" sound interchangeable but aren't — a CA's audit fee is professional services (10%), while an IT company's software maintenance contract is often treated as technical services (2%). Getting this wrong means either under-deducting (making the deductor liable for the shortfall plus interest) or over-deducting (creating an unnecessary refund claim for the payee).

Threshold and Exemptions

The ₹30,000 threshold applies separately to each category — professional and technical services are counted independently, so a payee could receive up to ₹30,000 under each head in a year before TDS kicks in on either. Individuals and HUFs not subject to tax audit in the preceding year are generally not required to deduct TDS under this section.