TDS on Professional & Technical Services (Section 194J): Complete Guide

पेशेवर सेवाओं पर टीडीएस (धारा 194J) नियम

Comprehensive guide to Section 194J of the Income Tax Act: differentiation between 10% TDS on professional services vs 2% TDS on technical services, ₹30,000 annual threshold limit, applicability on director sitting fees, and TRACES Form 16A reconciliation.

Written by: Author Profile

Direct Tax & CA Review Panel

Chartered Accountancy Review Panel • Senior Direct Tax Review Desk

Reviewed & Fact-Checked by: Technical Review Panel

Tax Law & Dispute Review Desk

Tax Litigation & Legal Review Panel • Tax Appeal & Procedure Review Desk

Published: 1st April 2026•Last Updated: 15th August 2026•Last Reviewed: 15th August 2026

Key Statutory Highlights (FY 2026-27 (AY 2027-28))

10% Rate applies to Professional Services: Medical, legal, engineering, architectural, accountancy, technical consultancy, and interior decoration.

2% Rate applies to Fees for Technical Services (FTS), royalty in the nature of software consideration, and call center / BPO operations.

Annual Threshold: ₹30,000 in a financial year for each separate category (Professional, Technical, Royalty, Non-compete fees).

Director Remuneration / Sitting Fees: 10% TDS applies without ANY minimum threshold exemption.

Individual / HUF payers are exempt unless their turnover in preceding FY exceeded ₹1 Crore (business) or ₹50 Lakh (profession).

Who is Eligible & When Does it Apply?

Applicability #1

All businesses and professionals paying fees to freelance consultants, legal counsel, doctors, and software contractors.

Step-by-Step Procedure & Compliance Roadmap

Classify Service as Professional vs Technical

Determine whether the scope of work falls under notified professions (10%) or standard technical implementation (2%).

Check ₹30,000 Threshold

If cumulative payments in the FY exceed ₹30,000, deduct tax at the time of credit or payment, whichever is earlier.

Deposit TDS via ITNS 281 by 7th

Remit tax using TAN under Major Head 0020/0021 Minor Head 200.

Issue Form 16A to Payee

Download digitally signed Form 16A from TRACES within 15 days of quarterly return filing.

Mandatory Documents Checklist

Consulting Invoices, PAN of Consultant, Work Contract / Engagement Letter, Form 16A

Common Mistakes & Compliance Risks to Avoid

•Deducting 10% on software development contracts when the 2% FTS rate applies.

•Not deducting TDS on Director sitting fees due to misunderstanding the ₹30k threshold (no threshold for directors).

Frequently Asked Questions

Is GST included when calculating TDS under Section 194J?

No. As per CBDT Circular No. 23/2017, if GST is indicated separately on the invoice, TDS is deducted ONLY on the base value excluding the GST amount.

Interactive Tax Calculators

TDS Calculator

Related Tax Knowledge

TDS Rates Matrix TDS Certificate (Form 16A)

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🛡️ Educational Disclaimer: FinSetu India is an independent educational guidance and calculation platform. Content is published for general citizen awareness based on applicable laws as of FY 2026-27 (AY 2027-28). We do not provide personalized legal/tax advice or file returns directly. Verify current applicable rules on official portals or consult a qualified Chartered Accountant / Tax Lawyer.