Income Tax | Tax Deducted at Source
Section 194J: TDS on Professional Fees, Technical Services, Royalty and Director Payments
Section 194J of the Income-tax Act, 1961 governs tax deduction at source on specified payments to resident recipients. This guide explains the covered payments, rates, monetary limits, definitions, exceptions and practical compliance.
Updated: 27 October 2026 | Historical provisions under the 1961 Act are explained alongside the framework of the Income-tax Act, 2025.
1. What payments are covered under Section 194J?
For payments governed by the Income-tax Act, 1961, Section 194J(1) requires qualifying payers to deduct income-tax on the following sums payable to a resident:
- Fees for professional services under clause (a).
- Fees for technical services under clause (b).
- Non-salary remuneration, fees or commission paid to a company director under clause (ba).
- Royalty under clause (c).
- Payments described in Section 28(va), generally for specified non-compete or non-sharing arrangements, under clause (d).
| Payment category | Normal TDS rate | Threshold under 1961 Act from 1 April 2025 |
|---|---|---|
| Professional services | 10% | Rs. 50,000 per financial year |
| Technical services (not professional services) | 2% | Rs. 50,000 per financial year |
| Royalty, other than qualifying film-distribution/exhibition royalty | 10% | Rs. 50,000 per financial year |
| Qualifying royalty for sale, distribution or exhibition of cinematographic films | 2% | Rs. 50,000 per financial year |
| Section 28(va) payments | 10% | Rs. 50,000 per financial year |
| Director's non-salary remuneration, fees or commission | 10% | No monetary exemption threshold under Section 194J |
| Payee engaged only in the business of operating a call centre | 2% | Apply the threshold rules relevant to the payment category |
The 2% rate for qualifying technical services and film-related royalty applies under the amended provisions. Salary paid to a director is generally subject to Section 192 rather than Section 194J.
2. Threshold and persons required to deduct tax
With effect from 1 April 2025, the monetary threshold under Section 194J increased from Rs. 30,000 to Rs. 50,000 for each separately specified category: professional fees, technical fees, royalty and Section 28(va) payments. Payments to the same recipient within the relevant category are aggregated over the financial year. The exclusion based on this threshold does not extend to director payments under clause (ba).
Companies, firms and other non-individual/HUF payers generally deduct tax when making covered payments. An individual or Hindu undivided family is also covered where the immediately preceding financial year's business turnover or professional gross receipts exceed the monetary limits referred to in Section 44AB. For such individuals or HUFs, professional fees paid exclusively for personal purposes are excluded by the statutory proviso.
3. Meaning of professional services, technical fees and royalty
Professional services
The explanation to Section 194J includes services in the legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration and advertising professions, and other professions notified by the Central Board of Direct Taxes for the purposes of Section 44AA or Section 194J.
Fees for technical services
The expression refers to Explanation 2 to Section 9(1)(vii). It generally covers consideration for managerial, technical or consultancy services, including provision of technical or other personnel, subject to the statutory exclusions. Classification depends on the real substance of the services and applicable case law.
Royalty
The expression follows Explanation 2 to Section 9(1)(vi), covering specified payments for rights or use of intellectual property, know-how, processes, equipment and other listed rights or assets, subject to the exact statutory language and applicable interpretation.
Section 28(va) payments
These include consideration for agreeing not to carry out an activity in relation to a business or profession, or not to share specified know-how, patents, copyright, trademarks, licences or other commercial rights, subject to the exclusions in that section.
4. Time of deduction and compliance
Deduct TDS at the earlier of credit or payment. A credit to a suspense account or any similarly named account in the payer's books is treated as credit to the payee for this purpose. The deduction and deposit obligations apply even if the payment is made by electronic transfer or another mode.
For periods governed by the 1961 Act, the payer ordinarily needs a TAN, must deposit TDS within the prescribed time, report applicable deductions in the relevant quarterly TDS statement (commonly Form 26Q for resident non-salary payments), and issue Form 16A. PAN non-availability may invoke Section 206AA and a higher deduction rate, subject to applicable law. Interest, fees and penalties may apply to defaults.
Where GST is shown separately in the invoice, CBDT guidance generally permits TDS on the amount excluding separately indicated GST, subject to the nature of the transaction and applicable circulars.
5. Practical illustrations
Professional fees
A company pays a resident chartered accountant Rs. 80,000 for professional services in a financial year governed by the amended 1961 Act. Assuming no exception, TDS is 10% of Rs. 80,000 = Rs. 8,000.
Technical service fees
A business pays a resident provider Rs. 1,20,000 for services properly classified as fees for technical services (not professional services). TDS at 2% is Rs. 2,400, assuming ordinary rates apply.
Director sitting fees
A resident director receives Rs. 20,000 as non-salary sitting fees. Section 194J generally applies at 10%, giving Rs. 2,000 TDS, even though the payment is below Rs. 50,000.
6. Position under the Income-tax Act, 2025
The Income-tax Act, 2025 applies from 1 April 2026 and reorganises the TDS provisions. Section 393 contains the principal TDS framework, including tables covering categories of payments. For a payment or compliance obligation arising on or after that date, consult the corresponding entry in Section 393, the applicable rules and current Income Tax Department guidance rather than applying a 1961 Act section number or legacy form automatically.
References to Sections 194J, 9(1)(vi), 9(1)(vii), 28(va), 44AA, 44AB, 192, 203A and 206AA above describe the historical framework under the 1961 Act. Their corresponding provisions and cross-references should be read in the 2025 Act for transactions to which it applies.
7. Frequently asked questions
What is the TDS rate under Section 194J?
Generally 10% for professional services, director fees, royalty and non-compete payments; 2% for fees for technical services other than professional services, certain film distribution royalty and qualifying call-centre payments.
What is the threshold for Section 194J?
From 1 April 2025, the annual threshold is Rs. 50,000 per payee for each applicable category of professional fees, technical fees, royalty and non-compete payments. The threshold exemption does not apply to non-salary director remuneration.
Does Section 194J apply to payments to non-residents?
Section 194J concerns payments to residents. Payments to non-residents require separate analysis, including Section 195 and applicable treaty provisions.
When must TDS be deducted?
At the earlier of credit to the payee account, including a suspense account, or actual payment.
Are individual taxpayers required to deduct TDS?
Individuals and HUFs are generally excluded unless their preceding-year business or professional turnover exceeds the applicable Section 44AB limits; specified personal-purpose professional payments are excluded.
8. Official legal references and guidance
- Income Tax Department: Income-tax legislation
- Income Tax e-Filing Portal: TDS services and forms
- Income Tax Department: Income-tax Act, 2025
- India Code: Central legislation
This article is a general guide. Rates, notifications, forms and statutory cross-references should be checked against the law applicable to the payment date and the facts of the transaction.