Under Section 194J of the Income Tax Act, the TDS rate for professional services is 10%, while the rate for technical services, call center operators, and certain royalties (like film distribution) is 2%. A threshold limit of ₹50,000 per financial year applies (effective from April 1, 2025), below which no TDS is deducted.
Section 194J covers payment for professional, technical fees, royalty and non compete fees, including directors remuneration. TDS is deducted at 10% for professional services, royalty and directors remuneration, 2% for technical services. Where PAN is not provided by the recipient, 20% TDS is deducted.
What is the current threshold for TDS deduction under Section 194J? The threshold limit as of April 1, 2025, is Rs. 50,000 per financial year; TDS applies only if payments exceed this limit.
Rate of TDS : TDS is to be deducted at the rate of 2 percent on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract, exceeds two lakh ifty thousand rupees.
While the general TDS rate is 10%, Section 194C specifies different rates for contractors and sub-contractors. Typically, the TDS rate under this section is 1% for individual or Hindu Undivided Family (HUF) contractors and 2% for other entities, such as companies or partnerships.
Thresholds and Rates in FY 2025–26
The applicable rate is 1% when the contractor is an individual or HUF, and 2% in other cases. For Section 194J, TDS is deducted once the total payment during the year exceeds ₹50,000. The rate is 10% for professional services and 2% for technical services.
TDS Rates for Contractors & Sub-Contractors
1% TDS for individuals or Hindu Undivided Families (HUF), if PAN is provided. 2% TDS for businesses, firms, companies, etc., with PAN. Transporters with ≤10 vehicles and who provide PAN are exempt. If the payee doesn't provide a PAN, a flat 20% TDS applies (penalty rate).
TDS Filing Software: Avoid These 7 Common Mistakes for Accuracy
The rate of TDS under GST is 2% on the payment made to the seller of taxable goods or services. This rate is bifurcated as follows: 1% CGST (Central Goods and Services Tax) 1% SGST (State Goods and Services Tax) or 2% IGST (Integrated Goods and Services Tax)
TDS Implications For An NRI Seller
There is a TDS deduction of 30% if the property held by you is less than or equal to 24 months old (from the date of purchase). And if the property held by you is more than 24 months old there is a TDS deduction of 20%.
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.
Examples of professional fees
A payee who believes their total income will be below the taxable limit or justifies a lower rate of TDS can apply for a lower tds deduction 194j. They can do this by submitting Form 13 for tds to the Assessing Officer.
While professional services are based on the knowledge and expertise of the professional, technical services are based on technical expertise and skill. For example, a lawyer provides professional services, while an engineer provides technical services.
A TDS (Tax Deducted at Source) rate chart is a comprehensive table that outlines the applicable tax deduction rates for various types of payments under the Income Tax Act, 1961.
What constitutes FTS as per the I-T Act, 1961? Fees for Technical Services (FTS) have been defined in Section 9 itself under clause (vii) as any consideration (including lump sum) for rendering of any managerial, technical or professional services including the services of technical or other personnel.
Under Section 194Q, TDS is applicable on the purchase of goods, if the amount exceeds Rs. 50 lakhs. Under Section 206C (1H), TCS is applicable on the sale of goods, if the amount exceeds Rs. 50 lakhs.
The section specifies tax collection at source (TCS) for certain transactions and TCS rates, such as 1% on the sale of scrap, 2.5% on the sale of timber, and 1% on the sale of minerals. If you are a seller with an annual turnover exceeding Rs.
Step 3: Divide your payable income tax by the number of months of employment to calculate the monthly TDS amount. For example, if your estimated total taxable income for the current financial year is ₹10,00,000 and you are employed for 12 months, your monthly TDS amount would be ₹10,00,000 X 30% / 12 = ₹25,000.
TDS stands for Tax Deducted at Source. The Golden rule of accounts is Debit the receiver, Credit the giver. TDS is a tax deducted by the payer at the time of making payment.
As per the current Income Tax rules, the exemption limits vary based on the age and taxable income of the depositor. The exemption limit for TDS on FDs is ₹ 50,000 for individuals excluding senior citizens. This means TDS will not be deducted if the interest earned on an FD in a financial year is below ₹ 50,000.
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. In case of payment does not exceed the directed Threshold exemption limits, TDS will not be deductible.
Section 194J applies to payments made to residents for professional and technical services, which include: Professional Services: Includes payments for services made by professionals like Chartered Accountants, Lawyers (legal fees), Doctors (medical services), Engineers, Architects, and Company Secretaries.