Section 194J requires TDS on fees for professional or technical services paid to a resident. The rate is 10% on professional fees (CA, doctor, lawyer, architect, engineer, consultant), 2% on technical services (IT support, call centre, software royalty) and 10% on director fees. No TDS if payments to a payee stay at or below the Rs50,000 threshold (raised from Rs30,000 in FY 2025-26) — but director fees have no threshold and are deducted from Re 1.
Section 194J — TDS Rates by Payment Type
The applicable rate and FY 2025-26 threshold for every payment covered by Section 194J. TDS is deducted on the fee excluding GST where GST is shown separately. See the full TDS rate chart 2025-26.
| Nature of payment | TDS Rate | Threshold (FY) | Examples |
|---|---|---|---|
| Fees for professional services | 10% | Rs 50,000 | Doctor, lawyer, CA / audit fee, architect, engineer, interior decorator |
| Fees for technical services | 2% | Rs 50,000 | IT support, testing, repair & maintenance (technical) |
| Call centre operator | 2% | Rs 50,000 | BPO / KPO / call-centre services |
| Royalty for sale of software | 2% | Rs 50,000 | Software licence fee treated as royalty |
| Other royalty & non-compete fee | 10% | Rs 50,000 | Non-software royalty, non-compete u/s 28(va) |
| Director fees / remuneration (non-salary) | 10% | No limit | Sitting fees, commission to directors |
| Payee without PAN (s.206AA) | 20% | — | Higher rate for a missing PAN |
The Rs50,000 limit (up from Rs30,000) applies separately to each category, per payee, per year. Director fees have no threshold — TDS from Re 1. No surcharge or cess on TDS for resident payees.
Once payments to a professional cross Rs50,000 in the financial year, TDS at 10% (or 2%) is due on the entire amount — including the earlier bills already paid below the limit, not just the excess. Track fees payee-wise across the year.
Section 194J vs 194C — Professional Fee or Work Contract?
The most common TDS error is classifying a payment under the wrong section. 194J covers professional or technical services; Section 194C covers contract work. For IT vendors the two often overlap — split the invoice correctly.
Section 194J — professional / technical
- Fees to CA, doctor, lawyer, architect, engineer, CS
- Management, IT and technical consultancy
- Software testing, data analytics, design services
- Threshold Rs50,000 per category, per year
Section 194C — contract work
- Construction, transport, catering, advertising production
- Software development as a work contract (product delivery)
- Supply of labour / manpower
- Threshold Rs30,000 single or Rs1,00,000 aggregate
Pure IT consulting, software testing or data analytics by an individual consultant is 194J at 10% (or 2% if purely technical). A software-development contract delivering a product using the vendor's own resources can be 194C at 2%. When in doubt for professionals and consultants, 194J is the safer classification.
Not sure whether to deduct under 194J or 194C? Get your vendor payments reviewed.
Talk to a TDS Expert →The New Rs50,000 Threshold & When to Deduct
From FY 2025-26 the Section 194J threshold rose from Rs30,000 to Rs50,000 per financial year, applied separately to each category (professional fees, technical fees, royalty, non-compete). TDS is deducted at the time of credit or payment, whichever is earlier — so an advance to a consultant attracts TDS at the time of the advance.
- Rs50,000 — per payee, per category, per financial year (up from Rs30,000)
- No threshold for director fees / remuneration — deduct from the first rupee
- Deduct at credit or payment, whichever is earlier; advances are covered
- Deducted on the fee excluding GST where GST is invoiced separately
10% CA / consultant fee — Rs1,00,000
2% Technical / IT-support fee — Rs1,00,000
Because deduction is triggered at credit or payment — whichever is earlier — an advance to a professional must have TDS deducted then, not at final settlement. Missing this leads to 30% expense disallowance under Section 40(a)(ia) plus interest under Section 201.
Who Deducts & Compliance Checklist
Any person paying professional or technical fees in the course of business must deduct — companies, firms, LLPs, trusts and government. For individuals and HUFs, deduction is required only if their books were subject to tax audit under Section 44AB in the preceding year.
- Obtain TAN before deducting
- Deduct at credit or payment, whichever is earlier
- Deposit challan by the 7th of the next month
- File quarterly Form 26Q
- Issue Form 16A to the payee
- Track the Rs50,000 threshold payee-wise
Section 206AB — the higher-rate deduction for payees who had not filed their income-tax returns — was omitted with effect from 1 April 2025. You no longer run a compliance-status check on each professional before deducting under 194J; only the Section 206AA higher rate (20%) for a missing PAN survives.
- 1DeductorDeducts 194J TDS on the fee
- 2DepositChallan by 7th of next month
- 3File 26QQuarterly return + Form 16A
- 426AS / AISCredit reflects for the payee
The professional claims this TDS credit while filing their income tax return — the amount is pre-filled from Form 26AS and the AIS, and any excess over the tax liability is refunded.
Under the Income-tax Act, 2025 (applicable from AY 2026-27), the professional-fees TDS provision is renumbered as Section 395. The 10% / 2% rates and the Rs50,000 threshold are unchanged. The familiar "194J" reference remains valid for FY 2025-26 and is what most deductors still use.
- Bare provision: incometax.gov.in — Section 194J, Income-tax Act 1961
- Threshold Rs50,000 — Finance Act 2025 (eff. 1 Apr 2025)
- Section 206AB omission — Finance Act 2025 (eff. 1 Apr 2025)
- TDS on fee excluding GST — CBDT Circular 23/2017
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.