TDS on Professional Fees explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
1. Overview: TDS on Professional and Technical Fees
Any person (other than an individual/HUF not subject to tax audit) who pays fees for professional or technical services must deduct TDS under Section 399 of the Income Tax Act, 2025. This section covers a wide range of payments — from doctor and lawyer fees to software consultancy, management consultancy, and call centre operations.
2. Who Must Deduct TDS Under Section 399?
TDS under Section 399 must be deducted by:
- Companies (domestic and foreign)
- LLPs and partnership firms
- Individuals and HUFs who are subject to tax audit (turnover above threshold)
- Government departments and PSUs
Individuals and HUFs who are NOT subject to tax audit are exempt from deducting TDS under Section 399 — they can pay professional fees without deducting TDS.
3. TDS Rates Under Section 399
| Nature of Payment | TDS Rate |
|---|---|
| Professional services (doctor, lawyer, CA, architect, engineer, consultant) | 10% |
| Technical services (IT support, maintenance, technical consultancy) | 2% |
| Royalty (for use of patents, know-how, copyright) | 10% |
| Non-compete fees (payment for not competing) | 10% |
| Call centre operations | 2% |
| Director remuneration (not salary) | 10% |
4. Threshold: Rs 30,000 Per Year
TDS is applicable only when the total payment to a single payee in a Tax Year exceeds Rs 30,000. The threshold applies separately for professional services and technical services — so Rs 30,000 professional + Rs 30,000 technical from the same vendor both need separate assessment. Once the threshold is crossed, TDS applies to all payments (including the first Rs 30,000 already paid).
5. Professional vs Technical: Key Distinction
The 10% vs 2% distinction is significant. Professional services involve individual expertise — a doctor examining a patient, a CA auditing books, a lawyer drafting a contract. Technical services involve applying technical knowledge that does not require the personal involvement of a specific individual — automated IT maintenance, cloud hosting support, technical helpdesk. When in doubt about classification, 10% is safer to avoid short deduction.
6. Practical Example
Illustrative only. ABC Pvt Ltd pays Rs 80,000 to a CA firm for tax audit services in Tax Year 2026-27. TDS computation: Rs 80,000 × 10% = Rs 8,000. The company pays Rs 72,000 to the CA and deposits Rs 8,000 to the government by the 7th of the following month. Form 26Q is filed quarterly reflecting this deduction. The CA claims Rs 8,000 TDS credit in their ITR.
7. Higher TDS if No PAN
If the professional or consultant does not provide their PAN, TDS must be deducted at 20% (higher of normal rate or 20%) under Section 406. Always collect PAN before making payments to avoid this penalty rate — which also burdens the payee who then has to claim a larger refund.
8. Why TaxClue
Correct classification between professional (10%) and technical (2%) services, applying the right threshold, and timely deposit are all critical for Section 399 compliance. TaxClue provides TDS advisory, deduction computation, and quarterly return filing. Contact us for TDS compliance under ITA 2025.
Key Facts About TDS on Professional Fees
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What is TDS on professional fees under ITA 2025?
Under Section 399 of the Income Tax Act, 2025, TDS must be deducted at 10% on payments for professional services (CA, doctor, lawyer, architect, engineer, consultant) and at 2% for technical services (IT support, maintenance, technical helpdesk, call centres) when the annual payment to a single payee exceeds Rs 30,000. The deductor must deposit TDS by the 7th of the following month and file Form 26Q quarterly.
What is the difference between professional and technical services for TDS?
Professional services require personal expertise of a specific individual — a CA auditing accounts, a doctor treating a patient, a lawyer advising on a case. The TDS rate is 10%. Technical services involve applying technical knowledge that does not require personal involvement — software support, cloud hosting, equipment maintenance, helpdesk operations. The TDS rate is 2%. The distinction matters significantly — misclassifying technical as professional results in 8% excess deduction.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
TDS on Professional Fees: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.