I pay a consultant, I pay an engineering firm for technical work, and I pay my company's non-executive director a sitting fee. Do I deduct two per cent or ten per cent on each, and does the fifty thousand rupee limit apply to all three?
Section 194J does not have one rate. Since 1 April 2020 it has two, and which one you use depends on which limb of sub-section (1) the payment falls into: two per cent for fees for technical services that are not professional services and for royalty that is consideration for the sale, distribution or exhibition of cinematographic films; ten per cent for everything else the section catches — professional fees, director's remuneration, other royalty and a non-compete sum under s.28(va) — and two per cent again, under a separate proviso, where the payee is engaged only in the business of operation of a call centre. The threshold in the first proviso is fifty thousand rupees, raised from thirty thousand by the Finance Act, 2025 with effect from 1 April 2025, and it is set out limb by limb for clauses (a), (b), (c) and (d) only — clause (ba), the director limb, is not in that list, so a single rupee of director's fee carries tax. An individual or Hindu undivided family is outside the section altogether unless the second proviso pulls them back in, and then only for fees for professional or technical services. All of this governs a sum credited or paid up to 31 March 2026: the Income-tax Act, 1961 stands repealed on 1 April 2026, and for a payment on or after that date the governing provision is section 393(1), Table, Serial No. 6(iii) of the Income-tax Act, 2025, which carries the same two rates and the same fifty thousand rupee threshold.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2025-04-01, reported as Section 194J of the Income-tax Act, 1961, as amended up to 2026. It bears on section 194J, section 9(1)(vii), section 9(1)(vi), section 194C, section 192, section 28(va), section 393 (Act of 2025), section 44AA, section 44AB, section 194M, section 201(1), section 40(a)(ia), section 206AA of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
The single most common error on this section is stating one rate. From 1 April 2020 the rate is fixed by limb, and the two limbs sit inside one unbroken sentence, so a reader who stops at “deduct an amount equal to two per cent” gets it wrong for a professional fee, and a reader who reaches only “ten per cent of such sum in other cases” gets it wrong for a technical fee. The bracket does the work: two per cent is for “fees for technical services (not being a professional services)”, so a service that answers the Explanation (a) list — legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising, or a profession notified by the Board for the purposes of section 44AA or of this section — stays at ten per cent even where it is also technical in the ordinary sense; engineering is the obvious collision, being both named in Explanation (a) and the classic technical service. The threshold trips people in the other direction: it is fifty thousand rupees only from 1 April 2025, so a note written for FY 2024-25 saying thirty thousand is right for that year and wrong for the next; it is tested limb by limb on the financial-year aggregate for that payee, not payment by payment and not on the total of all limbs; and it does not exist at all for clause (ba), because proviso (B) enumerates clauses (a), (b), (c) and (d) and simply never mentions (ba), so a company paying a non-executive director a five thousand rupee sitting fee deducts ten per cent on it. The other half of that boundary is section 192, since clause (ba) reaches only remuneration “other than those on which tax is deductible under section 192”, so a whole-time or managing director whose remuneration is salary is taxed through section 192 on the slab and only the fees and commission of a director who is not an employee travel through s.194J. Getting the limb wrong is not academic: short deduction brings interest and an order under section 201(1) and 201(1A), and puts the disallowance in section 40(a)(ia) in play in the deductor's own assessment.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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The text, as printed on the departmental page stamped Year 2026. 194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of — (a) fees for professional services, or (b) fees for technical services, or (ba) 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 (c) royalty, or (d) any sum referred to in clause (va) of section 28, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to two per cent of such sum in case of fees for technical services (not being a professional services), or royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films and ten per cent of such sum in other cases, as income-tax on income comprised therein: Provided that no deduction shall be made under this section — (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed — (i) fifty thousand rupees, in the case of fees for professional services referred to in clause (a), or (ii) fifty thousand rupees, in the case of fees for technical services referred to in clause (b), or (iii) fifty thousand rupees, in the case of royalty referred to in clause (c), or (iv) fifty thousand rupees, in the case of sum referred to in clause (d): Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income-tax under this section: Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family: Provided also that the provisions of this section shall have effect, as if for the words “ten per cent”, the words “two per cent” had been substituted in the case of a payee, engaged only in the business of operation of call centre. (2) [***] (3) [***] Explanation. — For the purposes of this section, — (a) “professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (b) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (ba) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c) where any sum referred to in sub-section (1) is credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly. The two borrowed definitions, read on the departmental page for section 9 stamped Year 2021. Explanation 2 to clause (vii) of section 9(1): “fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”. Explanation 2 to clause (vi) of section 9(1) defines “royalty” as consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for the six categories in sub-clauses (i) to (vi), which include the transfer of rights in a patent, invention, model, design, secret formula or process or trade mark, the imparting of information about their working or use, the imparting of information concerning technical, industrial, commercial or scientific knowledge, experience or skill, the use or right to use industrial, commercial or scientific equipment other than amounts referred to in section 44BB, the transfer of rights in any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, and the rendering of services in connection with those activities. The words “, but not including consideration for the sale, distribution or exhibition of cinematographic films”, which used to sit at the end of sub-clause (v), carry the footnote “Words ‘, but not including consideration for the sale, distribution or exhibition of cinematographic films’ Omtt. by the Act No. 12 of 2020, w.e.f. 1-4-2021.” The fourth limb borrows from section 28(va), read on the departmental page stamped Year 2024 (No. 1): any sum, whether received or receivable, in cash or kind, under an agreement for (a) not carrying out any activity in relation to any business or profession; or (b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services, with a proviso disapplying sub-clause (a) to a sum on transfer of the right to manufacture, produce or process any article or thing or the right to carry on any business or profession which is chargeable under the head “Capital gains”, and to compensation from the multilateral fund of the Montreal Protocol.
As the section stood from 1 April 2025 until the Income-tax Act, 1961 was repealed on 1 April 2026 — and as it still governs every sum credited or paid up to 31 March 2026, and every proceeding arising from one — it does five things. One. It imposes the obligation on every person except an individual or a Hindu undivided family, and fixes the point of deduction at credit or payment, whichever is earlier, with Explanation (c) treating a credit to a suspense account or any similarly named account as a credit to the payee. Two. It lists five kinds of payment: fees for professional services (a), fees for technical services (b), remuneration or fees or commission to a director of a company other than what is deductible under section 192 (ba), royalty (c), and a sum referred to in section 28(va) (d). Clauses (c) and (d) were inserted by the Taxation Laws (Amendment) Act, 2006 with effect from 13 July 2006; clause (ba) by the Finance Act, 2012 with effect from 1 July 2012. Three. It sets two rates, not one. Before 1 April 2020 there was a single rate: five per cent from 1 July 1995, and ten per cent after the word “five” was substituted by the Finance Act, 2007 with effect from 1 June 2007. The words “ten per cent of such sum” were then substituted by Act No. 12 of 2020, the Finance Act, 2020, with effect from 1 April 2020, by the split now printed: two per cent for fees for technical services that are not professional services, two per cent for royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films, and ten per cent in all other cases. The fourth proviso, inserted by Act No. 7 of 2017 with effect from 1 June 2017, separately reads “two per cent” for “ten per cent” where the payee is engaged only in the business of operation of a call centre. Ten per cent is therefore the rate for professional fees, for director's remuneration under clause (ba), for royalty that is not film royalty, and for a non-compete sum under clause (d). Four. It sets a threshold in proviso (B), and sets it limb by limb. The figure was twenty thousand rupees as enacted, thirty thousand rupees after the Finance Act, 2010 with effect from 1 July 2010, and is fifty thousand rupees after Act No. 7 of 2025, the Finance Act, 2025, with effect from 1 April 2025. Proviso (B) enumerates clause (a), clause (b), clause (c) and clause (d). It does not enumerate clause (ba). Director's remuneration therefore carries no threshold at all. Five. It controls the individual and Hindu undivided family gateway through the opening words and two provisos rather than through a sub-section. Sub-sections (2) and (3), which had provided for a lower or nil deduction certificate from the Assessing Officer, were omitted by the Finance Act, 2003 with effect from 1 June 2003; there is no s.194J(3) in force today, and a lower-deduction certificate is now sought under section 197. An individual or HUF is outside the section unless the second proviso applies, and then only for a sum by way of fees for professional services or technical services — an individual or HUF over the figures is still outside s.194J for royalty, for director's remuneration under clause (ba) and for a s.28(va) sum. That proviso now turns on fixed figures — turnover exceeding one crore rupees in business or fifty lakh rupees in profession in the immediately preceding financial year — which Act No. 12 of 2020 substituted, with effect from 1 April 2020, for the earlier cross-reference to “the monetary limits specified under clause (a) or clause (b) of section 44AB”. The third proviso then takes back out of the second proviso any professional fee paid exclusively for the personal purposes of the individual or a member of the HUF. For anything credited or paid on or after 1 April 2026 the section is spent. The Income-tax Act, 2025 came into force on that date under its s.1(3) and repealed the 1961 Act, and the successor provision is s.393(1), Table, Serial No. 6(iii), which carries the same two per cent and ten per cent split, the same fifty thousand rupee threshold for fees for professional services, fees for technical services, royalty and a s.26(2)(h) sum, and “Nil” against a director's remuneration.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved.
deduct an amount equal to two per cent of such sum in case of fees for technical services (not being a professional services), or royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films and ten per cent of such sum in other cases, as income-tax on income comprised therein
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Handle my notice → Ask a CA on WhatsAppSection 194J does not have one rate. Since 1 April 2020 it has two, and which one you use depends on which limb of sub-section (1) the payment falls into: two per cent for fees for technical services that are not professional services and for royalty that is consideration for the sale, distribution or exhibition of cinematographic films; ten per cent for everything else the section catches — professional fees, director's remuneration, other royalty and a non-compete sum under s.28(va) — and two per cent again, under a separate proviso, where the payee is engaged only in the business of operation of a call centre. The threshold in the first proviso is fifty thousand rupees, raised from thirty thousand by the Finance Act, 2025 with effect from 1 April 2025, and it is set out limb by limb for clauses (a), (b), (c) and (d) only — clause (ba), the director limb, is not in that list, so a single rupee of director's fee carries tax. An individual or Hindu undivided family is outside the section altogether unless the second proviso pulls them back in, and then only for fees for professional or technical services. All of this governs a sum credited or paid up to 31 March 2026: the Income-tax Act, 1961 stands repealed on 1 April 2026, and for a payment on or after that date the governing provision is section 393(1), Table, Serial No. 6(iii) of the Income-tax Act, 2025, which carries the same two rates and the same fifty thousand rupee threshold. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 194J, section 9(1)(vii), section 9(1)(vi), section 194C, section 192, section 28(va), section 393 (Act of 2025), section 44AA, section 44AB, section 194M, section 201(1), section 40(a)(ia), section 206AA of the Income Tax Act 1961. It is reported as Section 194J of the Income-tax Act, 1961, as amended up to 2026. The single most common error on this section is stating one rate. From 1 April 2020 the rate is fixed by limb, and the two limbs sit inside one unbroken sentence, so a reader who stops at “deduct an amount equal to two per cent” gets it wrong for a professional fee, and a reader who reaches only “ten per cent of such sum in other cases” gets it wrong for a technical fee. The bracket does the work: two per cent is for “fees for technical services (not being a professional services)”, so a service that answers the Explanation (a) list — legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising, or a profession notified by the Board for the purposes of section 44AA or of this section — stays at ten per cent even where it is also technical in the ordinary sense; engineering is the obvious collision, being both named in Explanation (a) and the classic technical service. The threshold trips people in the other direction: it is fifty thousand rupees only from 1 April 2025, so a note written for FY 2024-25 saying thirty thousand is right for that year and wrong for the next; it is tested limb by limb on the financial-year aggregate for that payee, not payment by payment and not on the total of all limbs; and it does not exist at all for clause (ba), because proviso (B) enumerates clauses (a), (b), (c) and (d) and simply never mentions (ba), so a company paying a non-executive director a five thousand rupee sitting fee deducts ten per cent on it. The other half of that boundary is section 192, since clause (ba) reaches only remuneration “other than those on which tax is deductible under section 192”, so a whole-time or managing director whose remuneration is salary is taxed through section 192 on the slab and only the fees and commission of a director who is not an employee travel through s.194J. Getting the limb wrong is not academic: short deduction brings interest and an order under section 201(1) and 201(1A), and puts the disallowance in section 40(a)(ia) in play in the deductor's own assessment. If it applies to you, the first step is this: Classify the payment into a limb before you pick a rate. Ask whether it answers Explanation (a) “professional services” first; if it does, the rate is ten per cent and the two per cent limb is closed to you, because that limb is expressly for fees for technical services “not being a professional services”.
The text, as printed on the departmental page stamped Year 2026. 194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of — (a) fees for professional services, or (b) fees for technical services, or (ba) 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 (c) royalty, or (d) any sum referred to in clause (va) of section 28, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to two per cent of such sum in case of fees for technical services (not being a professional services), or royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films and ten per cent of such sum in other cases, as income-tax on income comprised therein: Provided that no deduction shall be made under this section — (A) from any sums as aforesaid credited or paid before the 1st day of July, 1995; or (B) where the amount of such sum or, as the case may be, the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed — (i) fifty thousand rupees, in the case of fees for professional services referred to in clause (a), or (ii) fifty thousand rupees, in the case of fees for technical services referred to in clause (b), or (iii) fifty thousand rupees, in the case of royalty referred to in clause (c), or (iv) fifty thousand rupees, in the case of sum referred to in clause (d): Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such sum by way of fees for professional services or technical services is credited or paid, shall be liable to deduct income-tax under this section: Provided also that no individual or a Hindu undivided family referred to in the second proviso shall be liable to deduct income-tax on the sum by way of fees for professional services in case such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family: Provided also that the provisions of this section shall have effect, as if for the words “ten per cent”, the words “two per cent” had been substituted in the case of a payee, engaged only in the business of operation of call centre. (2) [***] (3) [***] Explanation. — For the purposes of this section, — (a) “professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section; (b) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; (ba) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (c) where any sum referred to in sub-section (1) is credited to any account, whether called “suspense account” or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly. The two borrowed definitions, read on the departmental page for section 9 stamped Year 2021. Explanation 2 to clause (vii) of section 9(1): “fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”. Explanation 2 to clause (vi) of section 9(1) defines “royalty” as consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for the six categories in sub-clauses (i) to (vi), which include the transfer of rights in a patent, invention, model, design, secret formula or process or trade mark, the imparting of information about their working or use, the imparting of information concerning technical, industrial, commercial or scientific knowledge, experience or skill, the use or right to use industrial, commercial or scientific equipment other than amounts referred to in section 44BB, the transfer of rights in any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, and the rendering of services in connection with those activities. The words “, but not including consideration for the sale, distribution or exhibition of cinematographic films”, which used to sit at the end of sub-clause (v), carry the footnote “Words ‘, but not including consideration for the sale, distribution or exhibition of cinematographic films’ Omtt. by the Act No. 12 of 2020, w.e.f. 1-4-2021.” The fourth limb borrows from section 28(va), read on the departmental page stamped Year 2024 (No. 1): any sum, whether received or receivable, in cash or kind, under an agreement for (a) not carrying out any activity in relation to any business or profession; or (b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services, with a proviso disapplying sub-clause (a) to a sum on transfer of the right to manufacture, produce or process any article or thing or the right to carry on any business or profession which is chargeable under the head “Capital gains”, and to compensation from the multilateral fund of the Montreal Protocol. The matter was decided on 2025-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. As the section stood from 1 April 2025 until the Income-tax Act, 1961 was repealed on 1 April 2026 — and as it still governs every sum credited or paid up to 31 March 2026, and every proceeding arising from one — it does five things. One. It imposes the obligation on every person except an individual or a Hindu undivided family, and fixes the point of deduction at credit or payment, whichever is earlier, with Explanation (c) treating a credit to a suspense account or any similarly named account as a credit to the payee. Two. It lists five kinds of payment: fees for professional services (a), fees for technical services (b), remuneration or fees or commission to a director of a company other than what is deductible under section 192 (ba), royalty (c), and a sum referred to in section 28(va) (d). Clauses (c) and (d) were inserted by the Taxation Laws (Amendment) Act, 2006 with effect from 13 July 2006; clause (ba) by the Finance Act, 2012 with effect from 1 July 2012. Three. It sets two rates, not one. Before 1 April 2020 there was a single rate: five per cent from 1 July 1995, and ten per cent after the word “five” was substituted by the Finance Act, 2007 with effect from 1 June 2007. The words “ten per cent of such sum” were then substituted by Act No. 12 of 2020, the Finance Act, 2020, with effect from 1 April 2020, by the split now printed: two per cent for fees for technical services that are not professional services, two per cent for royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films, and ten per cent in all other cases. The fourth proviso, inserted by Act No. 7 of 2017 with effect from 1 June 2017, separately reads “two per cent” for “ten per cent” where the payee is engaged only in the business of operation of a call centre. Ten per cent is therefore the rate for professional fees, for director's remuneration under clause (ba), for royalty that is not film royalty, and for a non-compete sum under clause (d). Four. It sets a threshold in proviso (B), and sets it limb by limb. The figure was twenty thousand rupees as enacted, thirty thousand rupees after the Finance Act, 2010 with effect from 1 July 2010, and is fifty thousand rupees after Act No. 7 of 2025, the Finance Act, 2025, with effect from 1 April 2025. Proviso (B) enumerates clause (a), clause (b), clause (c) and clause (d). It does not enumerate clause (ba). Director's remuneration therefore carries no threshold at all. Five. It controls the individual and Hindu undivided family gateway through the opening words and two provisos rather than through a sub-section. Sub-sections (2) and (3), which had provided for a lower or nil deduction certificate from the Assessing Officer, were omitted by the Finance Act, 2003 with effect from 1 June 2003; there is no s.194J(3) in force today, and a lower-deduction certificate is now sought under section 197. An individual or HUF is outside the section unless the second proviso applies, and then only for a sum by way of fees for professional services or technical services — an individual or HUF over the figures is still outside s.194J for royalty, for director's remuneration under clause (ba) and for a s.28(va) sum. That proviso now turns on fixed figures — turnover exceeding one crore rupees in business or fifty lakh rupees in profession in the immediately preceding financial year — which Act No. 12 of 2020 substituted, with effect from 1 April 2020, for the earlier cross-reference to “the monetary limits specified under clause (a) or clause (b) of section 44AB”. The third proviso then takes back out of the second proviso any professional fee paid exclusively for the personal purposes of the individual or a member of the HUF. For anything credited or paid on or after 1 April 2026 the section is spent. The Income-tax Act, 2025 came into force on that date under its s.1(3) and repealed the 1961 Act, and the successor provision is s.393(1), Table, Serial No. 6(iii), which carries the same two per cent and ten per cent split, the same fifty thousand rupee threshold for fees for professional services, fees for technical services, royalty and a s.26(2)(h) sum, and “Nil” against a director's remuneration.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "deduct an amount equal to two per cent of such sum in case of fees for technical services (not being a professional services), or royalty where such royalty is in the nature of consideration for sale, distribution or exhibition of cinematographic films and ten per cent of such sum in other cases, as income-tax on income comprised therein"
It was decided by the CBDT Circulars & Instructions on 2025-04-01 and is reported as Section 194J of the Income-tax Act, 1961, as amended up to 2026. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 194J, section 9(1)(vii), section 9(1)(vi), section 194C, section 192, section 28(va), section 393 (Act of 2025), section 44AA, section 44AB, section 194M, section 201(1), section 40(a)(ia), section 206AA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. As the section stood from 1 April 2025 until the Income-tax Act, 1961 was repealed on 1 April 2026 — and as it still governs every sum credited or paid up to 31 March 2026, and every proceeding arising from one — it does five things. One. It imposes the obligation on every person except an individual or a Hindu undivided family, and fixes the point of deduction at credit or payment, whichever is earlier, with Explanation (c) treating a credit to a suspense account or any similarly named account as a credit to the payee. Two. It lists five kinds of payment: fees for professional services (a), fees for technical services (b), remuneration or fees or commission to a director of a company other than what is deductible under section 192 (ba), royalty (c), and a sum referred to in section 28(va) (d). Clauses (c) and (d) were inserted by the Taxation Laws (Amendment) Act, 2006 with effect from 13 July 2006; clause (ba) by the Finance Act, 2012 with effect from 1 July 2012. Three. It sets two rates, not one. Before 1 April 2020 there was a single rate: five per cent from 1 July 1995, and ten per cent after the word “five” was substituted by the Finance Act, 2007 with effect from 1 June 2007. The words “ten per cent of such sum” were then substituted by Act No. 12 of 2020, the Finance Act, 2020, with effect from 1 April 2020, by the split now printed: two per cent for fees for technical services that are not professional services, two per cent for royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films, and ten per cent in all other cases. The fourth proviso, inserted by Act No. 7 of 2017 with effect from 1 June 2017, separately reads “two per cent” for “ten per cent” where the payee is engaged only in the business of operation of a call centre. Ten per cent is therefore the rate for professional fees, for director's remuneration under clause (ba), for royalty that is not film royalty, and for a non-compete sum under clause (d). Four. It sets a threshold in proviso (B), and sets it limb by limb. The figure was twenty thousand rupees as enacted, thirty thousand rupees after the Finance Act, 2010 with effect from 1 July 2010, and is fifty thousand rupees after Act No. 7 of 2025, the Finance Act, 2025, with effect from 1 April 2025. Proviso (B) enumerates clause (a), clause (b), clause (c) and clause (d). It does not enumerate clause (ba). Director's remuneration therefore carries no threshold at all. Five. It controls the individual and Hindu undivided family gateway through the opening words and two provisos rather than through a sub-section. Sub-sections (2) and (3), which had provided for a lower or nil deduction certificate from the Assessing Officer, were omitted by the Finance Act, 2003 with effect from 1 June 2003; there is no s.194J(3) in force today, and a lower-deduction certificate is now sought under section 197. An individual or HUF is outside the section unless the second proviso applies, and then only for a sum by way of fees for professional services or technical services — an individual or HUF over the figures is still outside s.194J for royalty, for director's remuneration under clause (ba) and for a s.28(va) sum. That proviso now turns on fixed figures — turnover exceeding one crore rupees in business or fifty lakh rupees in profession in the immediately preceding financial year — which Act No. 12 of 2020 substituted, with effect from 1 April 2020, for the earlier cross-reference to “the monetary limits specified under clause (a) or clause (b) of section 44AB”. The third proviso then takes back out of the second proviso any professional fee paid exclusively for the personal purposes of the individual or a member of the HUF. For anything credited or paid on or after 1 April 2026 the section is spent. The Income-tax Act, 2025 came into force on that date under its s.1(3) and repealed the 1961 Act, and the successor provision is s.393(1), Table, Serial No. 6(iii), which carries the same two per cent and ten per cent split, the same fifty thousand rupee threshold for fees for professional services, fees for technical services, royalty and a s.26(2)(h) sum, and “Nil” against a director's remuneration. It arises in TDS Defaults and How Tax Law Is Read matters, on section 194J, section 9(1)(vii), section 9(1)(vi), section 194C, section 192, section 28(va), section 393 (Act of 2025), section 44AA, section 44AB, section 194M, section 201(1), section 40(a)(ia), section 206AA of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For a technical fee that is not professional, deduct two per cent. For royalty, ask whether it is consideration for the sale, distribution or exhibition of cinematographic films — two per cent if it is, ten per cent if it is not. Deduct ten per cent on a non-compete sum under section 28(va) and on royalty that is not film royalty. There is no reduced rate for either. For a director, split the payment at section 192 first. Anything on which tax is deductible under section 192 is outside clause (ba) altogether. What is left — sitting fees, commission, professional fees to a non-executive director — is clause (ba), at ten per cent, with no threshold. Do not apply the fifty thousand rupee figure to it. Test the fifty thousand rupee threshold on the financial year aggregate for that limb and that payee, including sums likely to be credited or paid during the year. Date the payment: thirty thousand rupees governs anything before 1 April 2025. If the payee is engaged only in the business of operation of a call centre, apply the fourth proviso and deduct two per cent, whichever limb the payment is in. If your client is an individual or a HUF, check the second proviso against the preceding year's figures — one crore rupees for business, fifty lakh rupees for profession. Do not read these as the section 44AB limits; the cross-reference to section 44AB was taken out by the Finance Act, 2020 with effect from 1 April 2020 and replaced by these fixed numbers. If the individual or HUF is outside s.194J, look at section 194M before concluding there is no obligation. For a payment exclusively for the personal purposes of an individual or a member of a HUF, apply the third proviso and do not deduct — but note it carves out only fees for professional services, not technical fees, royalty or a section 28(va) sum. Do not look for a lower-deduction certificate in s.194J(2) or s.194J(3). They were omitted with effect from 1 June 2003; the application is under section 197. Where the payee has no PAN, apply section 206AA. Where the fight is whether the payment is a contract payment under section 194C or a professional or technical fee under s.194J, remember the CBDT's own answers in Circular No. 715 dated 8 August 1995 go both ways — payments to a recruitment agency were put under s.194J, and payments to an electrician or a contractor supplying an electrician's services under section 194C. The rates the circular quotes are the 1995 rates and are long superseded; only the classification survives. Record the credit date. Explanation (c) treats a credit to a suspense account, by whatever name, as a credit to the payee, so a year-end provision triggers the obligation even though nobody has been paid. For a sum credited or paid on or after 1 April 2026, stop citing section 194J. The Income-tax Act, 1961 stands repealed from that date and the successor is section 393(1), Table, Serial No. 6(iii) of the Income-tax Act, 2025: the same two per cent and ten per cent split, Rs 50,000 for fees for professional services, fees for technical services, royalty and a section 26(2)(h) sum, and “Nil” against a director's remuneration. Section 194J still governs anything credited or paid up to 31 March 2026, including in a later section 201 proceeding.
Still good law. Good law for its period. The text stated here is the current published text of s.194J, and no later edition of it was found. An older text of the section, still printing five per cent and twenty thousand rupees, is in circulation and must not be cited. The two rates and the fifty thousand rupee threshold are corroborated three ways beyond that text: four separate editions print the same rate sentence; the department's own explanatory material on tax deducted at source from fees for professional services, technical services and royalty states the same two rates, the same call-centre rule and the same threshold; and s.393(1), Table, Serial No. 6(iii) of the Income-tax Act, 2025 reproduces the same split. That last page also settles the director point in the same direction as s.194J — its threshold column reads “(i) for (a), (b), (d) and (e) of Col. B: Rs. 50,000. (ii) for (c) of Col. B: Nil”, and (c) is a director's remuneration. The amending Acts check out. The rate split is credited to Act No. 12 of 2020 with effect from 1 April 2020 and the threshold to Act No. 7 of 2025 with effect from 1 April 2025, both by footnote; the Finance Act, 2025 was read as enacted and confirms its own number and assent date. The Finance Act, 2026 (No. 4 of 2026) was read and contains no clause touching s.194J. What is open. The particular clause of the Finance Act, 2020 and of the Finance Act, 2025 making each substitution could not be isolated in the enacted Acts themselves, so the two effective dates rest on those footnotes and on the editions printing the substituted words. No judicial authority is relied on. The Supreme Court's decision in CIT v Kotak Securities Ltd on the meaning of “technical services”, which this library holds as a separate entry, was found only in a secondary reproduction and not in the Court's own record, so nothing from it is quoted or paraphrased here. Period. The Income-tax Act, 1961 stands repealed on 1 April 2026, the date the Income-tax Act, 2025 came into force under its s.1(3). This entry states the law for a sum credited or paid up to 31 March 2026 and for proceedings arising from one; for a payment on or after 1 April 2026, read s.393(1), Table, Serial No. 6(iii) of the 2025 Act. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry is statutory text, not a decision. It asserts no holding, no bench and no judge's words; the quoted string is statutory text. The date in decided_on, 1 April 2025, is the date the current text took effect and is NOT a decision date. What was taken from where. The section text in facts comes from the current published text of s.194J. Explanation 2 to s.9(1)(vii) and Explanation 2 to s.9(1)(vi), and s.28(va), come from published texts of those sections. Circular No. 715 dated 8 August 1995 was read in full; the rates it quotes are the 1995 rates and are deliberately not reproduced, only its classification answers. The three footnotes the dated claims rest on, verbatim as they are printed. In the current text, against each of the four occurrences of “fifty” in proviso (B): “Sub. for ‘thirty’ by Act No. 7 of 2025, w.e.f. 1-4-2025.” In the 2021 edition, footnote 81, against the rate words: “Sub. for ‘ten per cent of such sum’ by the Act No. 12 of 2020, w.e.f. 1-4-2020.” In the same edition, footnote 82, against the second proviso: “Sub. for ‘the monetary limits specified under clause (a) or clause (b) of section 44AB’ by the Act No. 12 of 2020, w.e.f. 1-4-2020.” The pre-2020 history comes from the 2014 edition, the only one read carrying the full footnote apparatus, with every marker position checked against the text rather than inferred. Three things this page does not settle. (1) The clause of the Finance Act, 2020 substituting the rate words, and the clause substituting the figures in the second proviso, could not be isolated in the enacted Act, so both dates rest on the footnotes. (2) The same is true of the ‘thirty’ to ‘fifty’ substitution: the Finance Act, 2025 has been read as enacted and confirms its short title, number (No. 7 of 2025) and assent date (29 March 2025), but the section 194J clause could not be isolated in it. (3) Whether the Board has notified any further ‘profession’ under Explanation (a) beyond the statutory list was not established; the footnote there points only to a commercial guide, which was not followed. This entry states only the statutory boundary with s.194C and s.192. The classification authorities are held separately in this library and nothing is quoted from any of them here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
As the section stood from 1 April 2025 until the Income-tax Act, 1961 was repealed on 1 April 2026 — and as it still governs every sum credited or paid up to 31 March 2026, and every proceeding arising from one — it does five things. One. It imposes the obligation on every person except an individual or a Hindu undivided family, and fixes the point of deduction at credit or payment, whichever is earlier, with Explanation (c) treating a credit to a suspense account or any similarly named account as a credit to the payee. Two. It lists five kinds of payment: fees for professional services (a), fees for technical services (b), remuneration or fees or commission to a director of a company other than what is deductible under section 192 (ba), royalty (c), and a sum referred to in section 28(va) (d). Clauses (c) and (d) were inserted by the Taxation Laws (Amendment) Act, 2006 with effect from 13 July 2006; clause (ba) by the Finance Act, 2012 with effect from 1 July 2012. Three. It sets two rates, not one. Before 1 April 2020 there was a single rate: five per cent from 1 July 1995, and ten per cent after the word “five” was substituted by the Finance Act, 2007 with effect from 1 June 2007. The words “ten per cent of such sum” were then substituted by Act No. 12 of 2020, the Finance Act, 2020, with effect from 1 April 2020, by the split now printed: two per cent for fees for technical services that are not professional services, two per cent for royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films, and ten per cent in all other cases. The fourth proviso, inserted by Act No. 7 of 2017 with effect from 1 June 2017, separately reads “two per cent” for “ten per cent” where the payee is engaged only in the business of operation of a call centre. Ten per cent is therefore the rate for professional fees, for director's remuneration under clause (ba), for royalty that is not film royalty, and for a non-compete sum under clause (d). Four. It sets a threshold in proviso (B), and sets it limb by limb. The figure was twenty thousand rupees as enacted, thirty thousand rupees after the Finance Act, 2010 with effect from 1 July 2010, and is fifty thousand rupees after Act No. 7 of 2025, the Finance Act, 2025, with effect from 1 April 2025. Proviso (B) enumerates clause (a), clause (b), clause (c) and clause (d). It does not enumerate clause (ba). Director's remuneration therefore carries no threshold at all. Five. It controls the individual and Hindu undivided family gateway through the opening words and two provisos rather than through a sub-section. Sub-sections (2) and (3), which had provided for a lower or nil deduction certificate from the Assessing Officer, were omitted by the Finance Act, 2003 with effect from 1 June 2003; there is no s.194J(3) in force today, and a lower-deduction certificate is now sought under section 197. An individual or HUF is outside the section unless the second proviso applies, and then only for a sum by way of fees for professional services or technical services — an individual or HUF over the figures is still outside s.194J for royalty, for director's remuneration under clause (ba) and for a s.28(va) sum. That proviso now turns on fixed figures — turnover exceeding one crore rupees in business or fifty lakh rupees in profession in the immediately preceding financial year — which Act No. 12 of 2020 substituted, with effect from 1 April 2020, for the earlier cross-reference to “the monetary limits specified under clause (a) or clause (b) of section 44AB”. The third proviso then takes back out of the second proviso any professional fee paid exclusively for the personal purposes of the individual or a member of the HUF. For anything credited or paid on or after 1 April 2026 the section is spent. The Income-tax Act, 2025 came into force on that date under its s.1(3) and repealed the 1961 Act, and the successor provision is s.393(1), Table, Serial No. 6(iii), which carries the same two per cent and ten per cent split, the same fifty thousand rupee threshold for fees for professional services, fees for technical services, royalty and a s.26(2)(h) sum, and “Nil” against a director's remuneration.
TaxSphere, “Statutory position — s.194J: two per cent on technical fees and film royalty, ten per cent on everything else, and a fifty thousand rupee threshold that never reaches a director”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-194j-two-per-cent-limb-ten-per-cent-limb-and-the-fifty-thousand-threshold/ (validity last checked 2026-09-23)
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I pay rent for a warehouse and I also hire a generator on a monthly charge. Do I deduct under section 194-I, at what rate on each, and from what figure does the obligation start — is it an annual total or a monthly one?
My money is stuck. Every invoice I raise has tax deducted at the full rate, my actual tax for the year is far less than the deductions, and I only get it back a year later when the refund comes. Somebody told me to apply for a lower-deduction certificate under section 197. What does section 197 actually say — which payments does it cover, what does the Assessing Officer have to be satisfied about, what form do I file, and can the certificate be backdated to cover the deductions already made?
I was paid to stay out of the business. Is the non-compete money capital or income?
I sold my controlling stake and separately took a large non-compete fee. Can the department call the covenant a sham and tax the fee?
