Here we will discuss amendment made in Section 194J in Finance Act 2020 as per Budget Announced on 1 Feb 2020

These changes are applicable from Financial Year 2020-21(Assessment Year 2021-22)

 

Currently TDS is deducted under Section 194J At 10% on following payments

  • Professional
  • Technical
  • Royalty
  • Non Compete Fees

 

As per Recent budget announced on 1 Feb 2020

Now on Technical Service TDS will be deducted at 10%

On Remaining Services, TDS will be deducted at 2%

Earlier Now
TDS Under Section 194J of TDS Under Section 194J of
Professional 10% Professional 10%
Technical Technical 2%
Royalty Royalty 10%
Non Compete Fees Non Compete Fees 10%

 

Why TDS Rate Reduced-Analysis

Currently on Certain Services, there is confusion of rate of TDS

Example - TDS on Computer Repair Service

In this case,some business are deducting TDS under Section 194J at 10% while others are deducting TDS under Section 194C @ 1% / 2%

Now after this amendment,TDS will be deducted on the same under Section 194J @ 2% as it is a Service other than Professional Service

 

Relevant extract of Finance Act 2020

It is proposed to amend the said sub-section so as to

provide that any person, not being an individual or a Hindu undivided family,

who is responsible for paying to a resident any sum by way of fees

for professional services, or fees for technical services, or any remuneration

or fees or commission by whatever name called, other than those on

which tax is deductible under section 192, to a director of a company,

or royalty or any sum referred to in clause (va) of section 28,

shall at the time of payment or credit of such sum to the account of the payee,

deduct an amount equal to two per cent. of such sum as income-tax in case of

fees for technical services (not being professional services)

nd ten percent of such sum in any other case.

 

Learn more about Section 194J here

 

Services covered

Example  

(1) Professional Services

CA service / Audit fees / Lawyer / CS / CWA

(2) Technical Service

Engineering Co / Technical inspection

(3) Royalty

Fees for patent / Copy right / Trademark

(4) Employees on contract doing white collared Job

Accountant / Salesman / Engineer hired directly or through agency

 

  1. Tax Practical
  2. Practical TDS (Non Salary)

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 10 years. He also provides Accounts Tax GST Training in Delhi and Pune.