For the financial year 2025-26, the threshold limit for TDS under Section 194J on professional fees is ₹50,000 per financial year per payee, increased from ₹30,000. TDS at 10% is deducted if total payments to a person exceed this limit. No limit applies to director's fees/remuneration, which are subject to TDS regardless of the amount.
Effective FY 2025 - 26, the threshold limit for TDS deduction under Section 194J has been revised from ₹30,000 to ₹50,000 in a financial year. This change provides additional compliance relief for small-scale service transactions.
Threshold Limit For Deducting Tax
The tax has to be deducted in case the payment for professional and technical services is greater than Rs 50,000 during the year. Please note this Rs 50,000 maximum limit is applicable to each type of item or payment independently.
u/s 194J(a) of the Income Tax Act, is related to TDS deduction on fees for Technical Services, and u/s 194J(b) of the Income Tax Act is related to TDS deduction on fees for Professional Services.
Examples of professional fees
The current 194JB TDS rates are as follows: 2% TDS Rate for PAN holders: A TDS rate of 2% is applicable on the total payment made to professionals if the aggregate amount exceeds ₹30,000 in a financial year.
Article 276 of the Indian Constitution states that the maximum amount that can be deducted for professional tax is ₹2,500 per annum. While earlier, this limit was ₹250, the 60th Amendment Act of 1988 increased the limit by ₹2,250 and set it to ₹2,500 to help state governments raise adequate funds.
Is GST applicable on payments under Section 194J? Yes, GST may be applicable depending on the nature of services and the GST registration status of the professional. If the professional is registered under GST, the invoice raised will include GST separately.
For short-term capital assets (held for less than 2 years), TDS is deducted at 30% plus surcharge and cess. Even when the sale value is below ₹50 lakhs, TDS is still applicable if the seller is an NRI.
Maximum marginal rate is the highest rate of tax at any income level. This means for those with incomes between Rs 2 crore and Rs 5 crore, 39% will be the highest applicable tax rate, and for those with incomes above Rs 5 crore, it will be 42.74% — the highest tax rate since 1992.
You can claim tax relief on: professional membership fees, if you must pay the fees to be able to do your job. annual subscriptions you pay to approved professional bodies or learned societies if being a member of that body or society is relevant to your job.
With the recent changes in the Indian Income Tax Act, it's now possible to pay zero tax on a salary of up to Rs. 7 lakhs. To pay zero tax on a 7 lakh salary using the old tax regime, maximize deductions: Claim Tax Rebate under Section 87A.
10% (for resident) 30%(For non-resident) 40%(For Foreign Co.) No exemption limit For Non-resident or Foreign Company, no deduction of TDS shall be made in respect of any income that is not chargeable to tax under the provisions of the Act.
Section 194J of the Income Tax Act mandates tax deductions at source (TDS) in respect of payments made for professional and technical services exceeding Rs. 30,000 in a financial year. Generally, the TDS rate is 10%, but it varies based on the type of service, with technical services requiring a 2% deduction.
TDS is deducted under section 194J if the payment exceeds Rs. 30,000 (Rs. 50,000 starting FY 2025-26) during a financial year. The TDS rate is 10% in general, but can be different based on the type of service, with the requirement to deduct 2% TDS for technical services.
Section 194Q, effective from 1st July 2021, mandates that buyers with a turnover exceeding Rs. 10 crore in the previous financial year must deduct TDS at 0.1% on purchases above Rs. 50 lakh from a seller.
Threshold Exemption Limit
As per the Budget 2025 update, effective from 1st April 2025, the threshold limit of TDS on Fees for Professional or Technical Services has been increased to Rs. 50,000 from the existing threshold of Rs. 30,000.
The federal income tax has seven tax rates in 2026: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The top marginal income tax rate of 37 percent will hit taxpayers with taxable income above $640,600 for single filers and above $768,600 for married couples filing jointly.
Section 194JB of the Income Tax Act requires any person—except individuals and Hindu Undivided Families (HUFs) not liable for a tax audit—to deduct Tax Deducted at Source (TDS) when making payments for professional services. The TDS must be deducted at the prescribed rate set by the government.
The formula would look like this:Initial fee + (Monthly retainer x Number of months of work) = Total consultant incomeExample: You calculate it takes two hours to set up a new client, and your hourly rate is $40, so you set your initial fee at $80. You set your monthly retainer at $450.
Identify the income considered for calculation: For salaried individuals, professional tax is worked out on the basis of gross monthly salary, before deductions such as provident fund or gratuity. For self-employed professionals and business owners, the calculation is usually linked to annual gross income.