TDS Guide · Section 194J · FY 2025-26

Section 194J — TDS on
Professional & Technical Fees

The correct TDS rate under Section 194J — 10% for professional fees, 2% for technical services — the new Rs50,000 threshold from FY 2025-26, plus rules for CA, doctor, legal, software and director payments.

Updated for FY 2025-26 (AY 2026-27) Budget 2025 threshold change CA-reviewed

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10%Professional fees

2%Technical services

Rs50,000New threshold FY 25-26

Rs0Director fees limit

Quick Answer

Section 194J requires TDS on fees for professional or technical services. The rate is 10% for professional fees (doctors, lawyers, CAs, architects, engineers) and director fees, and 2% for purely technical services, call centres and qualifying software royalty. From FY 2025-26 the threshold rose from Rs30,000 to Rs50,000 per financial year, applied separately to each category. Where the payee gives no PAN, TDS is 20% under Section 206AA.

Professional fees 10%

Technical / call centre 2%

Threshold (per category) Rs50,000

No PAN 20%

At a glance

Section 194J TDS Rates by Service Type

Every common payment under Section 194J, with the applicable rate and the FY 2025-26 threshold. See the full TDS rate chart 2025-26 for other sections.

Nature of Payment	TDS Rate	Threshold (FY 25-26)	Examples
Fees for professional services	10%	Rs 50,000 p.a.	Doctor, lawyer, CA / audit fee, architect, engineer, interior decorator
Fees for purely technical services	2%	Rs 50,000 p.a.	IT support, testing, repair & maintenance (technical)
Call centre services	2%	Rs 50,000 p.a.	BPO / KPO / call-centre operations
Royalty for sale/distribution of software	2%	Rs 50,000 p.a.	Software licence fee treated as royalty
Other royalty & non-compete fees	10%	Rs 50,000 p.a.	Royalty (non-software), non-compete under Sec 28(va)
Director fees (not salary)	10%	Nil	Sitting fees, commission to a director
No PAN furnished (Sec 206AA)	20%	—	Higher of 194J rate or 20%

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.

The core question

10% Professional vs 2% Technical — Which Applies?

The single distinction that decides your rate is whether the service is a "profession" under Section 44AA (10%) or a purely technical service (2%, reduced from AY 2022-23). Getting it wrong triggers a short-deduction demand and interest.

10%

Professional fees

Legal, medical, accountancy (CA / CS / CMA)
Engineering & architectural services
Technical consultancy & interior decoration
Director remuneration (other than salary)
Non-compete fees & non-software royalty

Technical / call-centre

Purely technical (managerial / technical / consultancy)
IT support, testing, technical maintenance
Call-centre & BPO operations
Royalty on sale or distribution of software
Lower rate to ease working capital

Mixed contracts default to 10%

Where a contract has both professional and technical elements (for example software development that also involves professional expertise), deduct at 10% if the dominant purpose is professional. Under-deducting at 2% on a professional payment attracts interest under Section 201(1A) and possible disallowance under Section 40(a)(ia).

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Budget 2025 change

The New Rs50,000 Threshold & Who Must Deduct

The Finance Act 2025 raised the Section 194J threshold from Rs30,000 to Rs50,000 with effect from 1 April 2025 (FY 2025-26). No TDS is deducted until aggregate payments in a category cross Rs50,000 in the year — but once crossed, TDS applies on the whole amount, not just the excess.

The Rs50,000 limit is checked separately for each category — professional fees, technical fees, royalty and non-compete fees each have their own Rs50,000 window.
Director fees have no threshold — deduct 10% from the first rupee.
Deductor must hold TAN, deposit TDS by the 7th of the next month (30 April for March), and file Form 26Q quarterly.

When an individual / HUF must deduct

An individual or HUF is liable to deduct under Section 194J only if liable to tax audit under Section 44AB in the preceding year (turnover above Rs1 crore for business or gross receipts above Rs50 lakh for profession). Personal payments by such individuals/HUFs are still outside 194J.

Worked example

How 194J TDS Is Computed

10% CA audit fee

Fee for the yearRs 1,00,000

Above Rs50,000 limit?Yes

TDS @ 10%Rs 10,000

Net paid to CARs 90,000

2% IT support (technical)

Fee for the yearRs 1,00,000

Above Rs50,000 limit?Yes

TDS @ 2%Rs 2,000

Net paid to vendorRs 98,000

The deductee claims this TDS as credit in their income-tax return against final liability; excess is refunded. It appears in Form 26AS and the AIS.

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Stay compliant

194J Deductor Compliance Checklist

What a deductor must do to stay clear of Section 201 interest and 40(a)(ia) disallowance:

Obtain TAN before deducting
Classify 10% vs 2% correctly
Collect payee PAN (else 20%)
Deduct at payment or credit, whichever is earlier
Deposit TDS by the 7th (30 Apr for March)
File Form 26Q every quarter
Issue Form 16A to the deductee
Reconcile with Form 26AS / AIS

Section 194J applies when

Payment is for a profession under Section 44AA
Payment is for technical / managerial / consultancy service
Royalty, non-compete or director (non-salary) fee
Deductor is a business / audited individual

Use a different section when

It is a work contract → Section 194C
It is rent of property → Section 194I
It is commission / brokerage → Section 194H
It is salary to an employee → Section 192

194J vs 194C — the common mix-up

If the primary deliverable is professional expertise or knowledge, use 194J (10%). If it is executing a fixed-scope work or task using manpower/resources, use 194C (1% / 2%). IT projects can fall either way depending on the dominant purpose of the contract.

Government sourcesAct & rates: incometax.gov.in · Section 194J, Income-tax Act 1961 (Sec 393 in the Income-tax Act 2025, w.e.f. AY 2026-27) · Threshold Rs30,000 → Rs50,000: Finance Act 2025, eff. 1 Apr 2025 · 2% technical rate: Finance Act 2020, w.e.f. AY 2022-23 · No-PAN 20%: Section 206AA

Section 194J — Frequently Asked Questions

Rates

What is the TDS rate under Section 194J?

Section 194J has two rates: 10% for fees for professional services (doctors, lawyers, CAs, architects, engineers), non-software royalty, non-compete fees and director fees (other than salary); and 2% for purely technical services, call centres and royalty on sale or distribution of software (reduced rate from AY 2022-23 per Finance Act 2020). If the payee does not furnish PAN, TDS is 20% under Section 206AA.

What is the TDS rate on CA fees under Section 194J?

TDS on Chartered Accountant fees, including audit fees, is 10% under Section 194J, because accountancy is a notified profession under Section 44AA. There is no reduced 2% rate for CA fees — the 2% rate applies only to purely technical services and call centres. Once aggregate CA fees in the year cross the Rs50,000 threshold (FY 2025-26), 10% is deducted on the entire amount.

What is TDS on doctor fees or legal fees under 194J?

Both medical (doctor) and legal services are professions notified under Section 44AA, so TDS is 10% under Section 194J once payments in the year exceed Rs50,000. The same 10% rate applies to architects, engineers, company secretaries, cost accountants and interior decorators.

What is the TDS rate under 194J if PAN is not provided?

If the deductee does not furnish a valid PAN, TDS is deducted at the higher of the normal 194J rate or 20% under Section 206AA. In practice this means 20% for both professional and technical payments, and no threshold benefit if the deductor cannot verify the PAN.

Threshold

What is the threshold limit for Section 194J in FY 2025-26?

From FY 2025-26 (AY 2026-27) the threshold is Rs50,000, raised from Rs30,000 by the Finance Act 2025 with effect from 1 April 2025. No TDS is deducted until aggregate payments in a category cross Rs50,000 in the financial year. Once crossed, TDS applies on the entire amount, not only the portion above Rs50,000.

Is the Rs50,000 limit a combined limit for all 194J payments?

No. The Rs50,000 threshold is applied separately to each category of payment — professional fees, technical fees, royalty and non-compete fees. Each category has its own Rs50,000 window per payee per year, so payments in one category are not clubbed with another for the threshold test.

Is there a threshold for TDS on director fees under 194J?

No. Director remuneration or fees (other than salary taxed under Section 192) have no threshold under Section 194J — TDS at 10% is deducted from the first rupee. The Rs50,000 exemption applies only to professional, technical, royalty and non-compete payments, not to director fees.

Applicability

Who is required to deduct TDS under Section 194J?

Any person other than an individual or HUF must deduct TDS under Section 194J. An individual or HUF must deduct only if they were liable to tax audit under Section 44AB in the preceding financial year (business turnover above Rs1 crore or professional gross receipts above Rs50 lakh). Payments for purely personal purposes by such individuals/HUFs are outside 194J.

What is the difference between 194J professional and technical services?

Professional services under 194J are those rendered in a profession notified under Section 44AA — legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration — taxed at 10%. Technical services (taxed at 2% from AY 2022-23) are managerial, technical or consultancy services that require technical skill but do not fall within the Section 44AA professions, such as IT support and call-centre operations.

When does Section 194J apply instead of Section 194C?

Section 194J applies where the primary deliverable is professional expertise or knowledge (10%). Section 194C applies to work contracts — construction, manufacturing to specification, advertising, catering, transport, labour supply (1% individual/HUF, 2% others). If a contract mainly executes a task using resources or manpower, it is 194C; if it mainly renders professional or technical expertise, it is 194J.

Is TDS under 194J applicable on reimbursement of expenses?

Pure reimbursements supported by evidence, billed separately from the professional/technical fee, are generally not subject to 194J TDS. But if reimbursements are bundled into a single consolidated bill without break-up, the tax department may treat the whole amount as fees liable to TDS. Keep expense reimbursements on separate invoices.

Compliance

When must TDS deducted under 194J be deposited and returned?

TDS must be deposited by the 7th of the following month (for March, by 30 April). The deductor files Form 26Q quarterly and issues Form 16A to the deductee. Late deposit attracts interest at 1.5% per month under Section 201(1A), and late filing attracts a Rs200/day fee under Section 234E.

What happens if TDS under 194J is not deducted?

Failure to deduct or deposit 194J TDS can lead to disallowance of 30% of the expenditure under Section 40(a)(ia), interest under Section 201(1A) (1% per month for non-deduction, 1.5% for non-payment after deduction) and penalty. The deductor is also treated as an assessee-in-default for the tax not deducted.

Deductee

How do I claim credit for TDS deducted under Section 194J?

TDS under 194J appears in your Form 26AS and Annual Information Statement (AIS). Claim it in Schedule TDS of your income-tax return as a credit against your final tax liability; any excess is refunded. Ensure the PAN you gave the deductor matches your PAN so the credit is not mismatched.

I am a freelancer — how does 194J affect me?

If your clients are businesses (or audited individuals/HUFs) and your fees cross Rs50,000 in a category during the year, they deduct 10% (professional) or 2% (technical) as 194J TDS before paying you. You claim that TDS in your ITR. Many freelancers with receipts up to Rs75 lakh can also opt for presumptive taxation under Section 44ADA to declare 50% of receipts as income.

New law

Has Section 194J changed under the Income-tax Act 2025?

The substance of Section 194J continues under the new Income-tax Act 2025 (applicable from AY 2026-27) — it is renumbered as Section 393 in the new Act, but the 10%/2% rates, the Rs50,000 threshold and the professional-vs-technical distinction remain the same. For search and reference, "Section 194J" stays the well-known identifier.

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