Professional services have exploded in the last decade — designers, consultants, content creators, doctors, engineers, CAs, lawyers, and countless specialists now work independently or with firms. And with this freedom comes one important requirement: Tax Deducted at Source (TDS). For anyone paying or receiving professional fees, knowing which section of the Income Tax Act governs TDS is essential. It prevents confusion, ensures compliance, and keeps you safe from penalties.
In India, TDS on payments for professional services is deducted under Section 194J of the Income Tax Act, 1961. This section applies not just to classic “professional services” but also technical services, royalty payments, & directors’ fees (other than salary).
Under Which Section Is TDS Deducted on Professional Services?
The straightforward answer is:Section 194J of the Income Tax Act, 1961. But the section covers far more than many people realise.
Under this provision:
- Any person making payments for professional or technical services
- Above the prescribed threshold
- Must deduct TDS before releasing the payment"
This is why you’ll hear phrases like:
- TDS under Section 194J
- TDS is deducted under Section 194J
- Section 194J professional fees TDS
Let’s break down what actually falls under this section.
What Counts as “Professional Services” Under Section 194J?
The law includes a wide range of professions. If you’re paying any of the following, Section 194J may apply:
- Accountants
- Doctors
- Lawyers
- Engineers
- Architects
- Technical consultants
- Interior decorators
- IT consultants
- Management & business consultants
- Artists, writers, designers
- Media and advertising professionals
Basically, any specialised skill or expert service falls into this category.
Also Read: TDS on Professional and Technical Services
Other Payments Covered Under Section 194J
Section 194J isn’t only for professional fees. It also applies to:
- Technical service fees
- Royalty payments
- Fees for not carrying out certain activities"
- Director’s remuneration (excluding salary)
This makes Section 194J one of the most widely used TDS sections for service-based industries.
TDS Rates Under Section 194J
There are two main rates:
1. For professional & technical services: 10% TDS
2. For technical services under specific conditions: Sometimes 2% TDS applies (especially in cases covered under 194J(ba))
The payer must deduct TDS at the time of payment or credit — whichever happens earlier.
When Is TDS Under Section 194J Required?
If the total payment to a professional in a year exceeds ₹30,000, TDS must be deducted.
This is cumulative. Even ten small payments of ₹3,000 each can cross the threshold.
I once saw a small business owner get a notice because he paid a graphic designer ₹3,000 a month without TDS — not realising it added up to ₹36,000 a year. A simple misunderstanding created unnecessary trouble.
Why Does TDS Exist for Professional Services?
Even though it feels irritating to see a part of your payment deducted, TDS actually helps:
- It ensures taxes are collected regularly
- It prevents tax evasion
- It creates a clean financial trail
- It balances the tax burden throughout the year
Think of it like a prepaid tax — you eventually get credit for it when filing your ITR.
Also Read: TDS on Professional and Technical Fees
Real-Life Example: How Section 194J Plays Out
Let’s say you hire a consultant & agree to pay ₹50,000.
Here’s what happens:
- You deduct 10% TDS = ₹5,000
- Pay ₹45,000 to the consultant
- Deposit ₹5,000 with the government under the consultant’s PAN
- Issue a TDS certificate so they can claim credit while filing ITR
The consultant will then adjust this TDS against their final tax liability.
This simple workflow creates transparency for both parties.
Common Mistakes People Make With Section 194J
- Not deducting TDS at all: This leads to penalties and disallowance of expenses for the payer.
- Deducting at the wrong rate: Many people confuse 2% and 10%.
- Missing the due date for depositing TDS: This creates interest & late fees.
- Not issuing TDS certificates to professionals: The professional loses credit until corrected.
- Assuming small payments don’t require TDS: The yearly threshold still applies.
Small oversights like these often cause stress during notice season.
Benefits of Understanding Section 194J
- You avoid penalties
- You avoid disallowance under Section 40(a)(ia)
- Both payer and receiver stay tax-compliant\"
- You improve financial hygiene
- You build trust with clients & vendors
Knowing your tax obligations makes your business look professional & dependable.
Quick Checklist Before Paying a Professional
- Will the total payment cross ₹30,000 this year?
- Is the service covered under Section 194J?
- Do I need to deduct 10% TDS?
- Have I taken their PAN?
- Am I depositing TDS on time?
These five questions save you from 90% of mistakes.
Also Read: TDS on Interest (FDs, Loans, etc.): Everything You Must Know
Conclusion
TDS can feel complicated the first time you deal with it, but once you understand the basics, it becomes a simple part of everyday business. And the rule is clear: TDS on payments for professional services is deducted under Section 194J of the Income Tax Act, 1961. Whether you’re a freelancer wondering why your payment got reduced, or a business owner trying to stay compliant, knowing this section makes life easier.
And if you ever feel confused about TDS, filings, or deductions, the experts at CallMyCA.com are always there to guide you with clarity & care.
