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Income Tax · TDS/TCSTDS on professional and technical fees (Section 194J): 10%, 2% and the ₹50,000 limit
Paying a CA, lawyer, doctor, consultant, designer or IT firm? TDS under Section 194J – now an entry in Section 393 of the Income-tax Act, 2025 – applies at 10% or 2%, with a higher ₹50,000 threshold from April 2025. Here is how to classify and compute it.
Section 194J of the 1961 Act covers TDS on fees for professional services, fees for technical services, royalty, non-compete fees and director's remuneration paid to residents. Under the Income-tax Act, 2025, these are entries in the table under Section 393(1) from 1 April 2026.
Professional vs technical services
| Category | Examples | Rate |
|---|---|---|
| Professional services | Legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising (creative), film artists, company secretaries, information technology (as notified), sports persons and commentators | 10% |
| Technical services | Managerial, technical or consultancy services that are not "professional" – e.g. IT support, technical maintenance by specialists | 2% |
| Royalty – films | Sale, distribution or exhibition of cinematographic films | 2% |
| Royalty – others | Software licences, trademarks, know-how | 10% |
| Call centre | Business of operating call centres | 2% |
| Director's fees / commission | Non-salary payments to directors | 10% |
| Non-compete fees | Section 28(va) payments | 10% |
Thresholds (from 1 April 2025)
- ₹50,000 per year for professional services.
- ₹50,000 per year for technical services.
- ₹50,000 per year for royalty and for non-compete fees.
- No threshold for director's fees.
- Without PAN: 20%.
Who deducts
All payers except individuals and HUFs not liable to tax audit (who pay for personal purposes). Individuals/HUFs not covered must deduct 2% on professional/contract payments exceeding ₹50 lakh a year under the separate entry (old 194M).
Worked example 1: CA and lawyer fees
Example: RPG Traders Pvt Ltd pays in FY 2026-27 (Tax Year 2026-27):
| Payee | Nature | Annual amount | TDS |
|---|---|---|---|
| CA firm | Audit and tax services | ₹1,80,000 | 10% = ₹18,000 |
| Lawyer | One case, ₹45,000 | ₹45,000 | Nil (below ₹50,000) |
| IT company | Annual technical support | ₹3,60,000 | 2% = ₹7,200 |
| Interior designer | Office design | ₹2,50,000 | 10% = ₹25,000 |
| Independent director | Sitting fees | ₹40,000 | 10% = ₹4,000 (no threshold) |
Worked example 2: crossing the threshold mid-year
Example: A company pays a consultant ₹20,000 in May, ₹20,000 in August and ₹20,000 in November. In November the aggregate becomes ₹60,000, crossing ₹50,000. TDS at 10% is deducted on the full ₹60,000 = ₹6,000 at the time of the November credit/payment. If the consultant later raises another bill, deduct 10% on that too.
Software payments
Payments for purchase of off-the-shelf software (sale) are not royalty for TDS where the conditions of CBDT notification are met (e.g. software acquired directly or through distributors without modification). Customised software development is generally professional or technical services. Licence fees for use of software may be royalty.
GST and reimbursements
- Where GST is shown separately on the invoice, TDS is on the amount excluding GST (CBDT Circular 23/2017).
- Out-of-pocket expenses billed in the same invoice are usually subjected to TDS; separately billed actual reimbursements may be excluded depending on facts.
Doctors and hospitals
Payments by hospitals to visiting doctors on a retainer are professional fees (10%), whereas salaried doctors fall under salary TDS. Payments by individuals for personal medical treatment are not subject to TDS.
Timing, deposit and returns
- Deduct at credit or payment, whichever is earlier – including year-end provisions credited to the payee's account.
- Deposit by the 7th of the next month (30 April for March).
- File quarterly statements and issue certificates.
Consequences of default
Interest of 1%/1.5% per month, disallowance of 30% of the expense until TDS is paid, late fee ₹200 per day for statements, and penalties. Details in TDS defaults.
Old vs new
For Tax Year 2026-27, use the Section 393(1) entry for fees for professional or technical services; for FY 2025-26 and earlier, Section 194J. See the TDS rate finder.
Common mistakes
- Using the old ₹30,000 threshold.
- Deducting 10% on technical services where 2% applies (excess TDS blocks the payee's cash flow).
- Applying the threshold to director's fees.
- Not deducting on year-end provisions for audit fees.
Key takeaway
Classify the service first – professional (10%) or technical (2%) – then apply the ₹50,000 threshold per category, with no threshold for directors. Our TDS and payroll team reviews vendor masters and TDS rates as part of monthly compliance.
Official references
Provisions discussed (summaries in our Law Library):
- Income-tax Act, 2025 – Section 393(1) (corresponds to 194J): TDS – professional & technical fees
- Income-tax Act, 1961 – Section 194J (corresponds to 393(1)): TDS – professional & technical fees
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
What is the TDS threshold for professional fees now?
₹50,000 in a financial year per payee for fees for professional services, raised from ₹30,000 by the Finance Act, 2025. A separate ₹50,000 threshold applies to fees for technical services and to royalty.
When is TDS on technical services 2%?
Fees for technical services (other than professional services), royalty for sale, distribution or exhibition of films, and payments to call centres attract 2%. Professional services attract 10%.
Is there a threshold for director's sitting fees?
No. Remuneration, fees or commission to a director (other than salary) attracts 10% TDS without any threshold.
Is TDS deducted on reimbursement of expenses billed by a consultant?
If the reimbursement is included in the professional's bill, TDS generally applies on the whole amount. If actual expenses are billed separately with supporting bills, there are arguments for excluding them, but practice varies – many deductors deduct on the gross.
Is TDS deducted on payment to a hospital for staff medical check-ups?
Payments to hospitals for medical services for employees are generally professional services, and TDS at 10% applies above ₹50,000 a year.
Is TDS needed on CA fees paid by an individual for personal ITR filing?
No. Individuals and HUFs not liable to tax audit need not deduct TDS for personal payments.
Does 194J apply to payments to a foreign consultant?
No. Payments to non-residents fall under Section 195 (Section 393(2)), with rates under the Act or the DTAA.
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
Have a tax, GST or business question?
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