"Great things never came from comfort zones"           "Wealthy people invest first and spend what’s left and broke people spend first and invest what’s left"           "Good, better, best. Never let it rest. Till your good is better and your better is best"           "Investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future"           "You cannot save time for future use, but you can invest it for the future you"           "The secret to getting ahead is getting started.................Start using your Savings to Earn Money"           "The best gift, and investment, you can give your child is your time"           "Investing in your child’s education is never a wasted effort"           "Do something today that your future self will thank you for"

Section-194J-TDS-on-Professional-Fees-or-Technical-Services

 

Section 194J TDS on Professional Fees or Technical Services

465 views
13
Introduction-

Section 194J TDS on Professional Fees or Technical Services charged in respect of any sum paid to resident person by way of-

  • Fee for professional services, or
  • Fee for technical services, or
  • Royalty, or
  • Remuneration/fee/commission paid to a director other than those covered under section 192, or
  • Non-compete fee according to the Income Tax Act of Section 28(VA).

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.

 

 
i) Professional Services-

Fee for Professional services will be treated as professional fees under section 194J of Income Tax Act 1961-

  • Architectural
  • Legal
  • Engineering
  • Accountancy
  • Interior Decoration
  • Advertising
  • Technical Consultancy
  • Film Artist
  • Company Secretary
  • Sports persons
  • Event managers
  • Commentators
  • Anchors & Sports columnists
  • Umpires and referees
  • Coaches and trainers
  • Physiotherapists
  • Team physicians
   
ii) Technical Services-

Technical services refer to those services rendered by an individual for consultancy, technical or managerial services.

Services such as assembly, mining, construction is not considered as technical services as income from the same would be deemed as salary of the recipient.

 
iii) Non-compete Fees-

Non-compete fees refers to the amount received either in cash or kind, in return for an agreement which restricts the person from sharing any license, patent, franchise, trademark, know-how, commercial or business rights etc.

 
iv) Royalty-

Royalty in relation to this provision refers to the following:

  • Transfer of rights in relation to invention, secret formula, model, design, trade mark or patent.
  • Use of an invention, model, patent etc.
  • Sharing of information related to the usage of an invention, patent, formula etc.
  • Use or right to use equipment for industrial, scientific or commercial purposes.
  • Transfer of rights related to literary work, scientific findings, films or video tapes for the purpose of radio broadcasting without any consideration for sale, exhibition or distribution of the same.
   
When TDS should be deducted-

Any person (other than an Individual or HUF) who is responsible for paying to a resident any sum (referred to in Section 194J) shall deduct tax-

  • Either at the time of payment
  • Or at the time of credit (in any account of payee)

Whichever is earlier.

An individual or a HUF, whose gross receipts, total sales or turnover from the business or profession carried on by him exceeds the monetary limits specified under section 44AB or if such individual or HUF was liable to get his accounts audited under section 44AB during immediately preceding Financial year, shall be liable to deduct tax under section 194J.

 

The surcharge, education cess or SHEC shall not be included in the above tax rates.

-In cases of furnishing his PAN –

  • TDS to be deducted at the rate of 10%.
  • TDS to be deducted @ 2% in case of a person engaged in the business of call center (Applicability from 1st June 2017)

-In cases of Non furnishing of PAN- TDS should be deducted at the higher of the following rates-

  • At the rate of 20%.
  • At the rate or rates in force, i.e., the rate prescribed in the Finance Act.
  • At the rate specified in the relevant provision of the Income-tax Act.

 

See related posts : How to File Revise TDS Return
 
Example 1.
If M/s X & Co. has paid professional fees to M/s Jain Associates of Rs. 20,000 on 25.05.2018 and 15,000 on 28.12.2018. Whether provision of TDS under section 194J is applicable or not?

Answer-

M/s X & Co. has liable to deduct TDS @ 10% on Rs. 35,000 i.e. Rs. 3,500 and should be deposited the same with in the time limit.

 

Exemption-

TDS on Professional Fees is not required to be deducted in the following cases:

  • If payment is made by an Individual or Hindu Undivided Family exclusively for personal purposes.
  • If the assessee has applied to the Assessing Officer for no TDS or TDS at a lower rate u/s 197.
  • No tax is required to be deducted where the amount that is paid or payable as the professional fee during the financial year does not exceed Rs. 30,000/-

 

Example 2.
If M/s X & Co. has paid professional fees to M/s Jain Associates of Rs. 15,000 on 25.05.2018 and 12,000 on 28.12.2018. Whether provision of TDS under section 194J is applicable or not?

Answer-

M/s X & Co. has not liable to deduct TDS because the threshold limit of Rs. 30,000 has not exceeded.

 

 
Time limit for Payment of Tax Deducted
In case of a Government deductor-
  1. In case the tax has to be deposited without challan – Same Day on which date tax has deducted
  2. In case the tax has to be deposited with challan – 7th Day of the next month
In case of Non-Government Deductor-
  1. Tax for the month of March – 30th April
  2. Tax for any other month – 7th Day of the next month in which month tax has deducted.
 
Example 3.
If M/s X & Co. has paid professional fees to M/s Jain Associates of Rs. 20,000 on 25.05.2018 and 15,000 on 28.12.2018. What is the due date for deduction of TDS under section 194J?

Answer-

M/s X & Co. has liable to deduct TDS @ 10% on Rs. 35,000 i.e. Rs. 3,500 on 28.12.2018, because at the time of payment of Rs. 15,000 the threshold limit has exceeded and the firm is liable to deduct TDS on total payment.

 
Example 4.
If M/s X & Co. has deducted TDS of Rs. 3,500 on 28.12.2018. What is the due date for deposit of TDS under section 194J?

Answer-

The due date for payment of TDS is 7th of next month i.e. 07.01.2019.

   
Issuance of TDS Certificate
  • Form 16A is to be issued by every deductor to the deductee within 15 days from due date of furnishing quarterly TDS return.
 
Interest charged under section 201-A-
The interest amount will be calculated on monthly basis not day to day basis, part of month will be calculated as full month.
Non Deduction of TDS- 1% per month from the date on which TDS was due till the date it was deposited.
TDS deducted but not deposited- 1.50% per month from the date of deduction till the date it was deposited.
 
Example 5.
If you have fail to deducted TDS of Rs. 10,000 on 05.07.2017 but deducted on 12.10.2017 and deposited on same day, you have to pay interest of 4 months @ 1% i.e. comes to Rs. 400/- for non-deduction of TDS.
 
Example 6.
If you have deducted TDS of Rs. 10,000 on 05.07.2017 and deposited on 12.10.2017, you have to pay interest of 4 months @ 1.50% i.e. comes to Rs. 600/- due to not deposited in time.
   
Prosecution (Sec 276B)

As per the Income Tax Act, if any person who deducts the tax at source but fails to deposit it with the government within the time limit, then he may be punishable with imprisonment for a term of minimum 3 months to maximum 7 years including the fine.

 

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

Particulars

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 year of deposit

 




Comments


Leave a Reply

Name *
Comments *
   

© 2019 - EnSkyAR Financial Services