TDS Under Section 194J on Professional Fees: Guide 2026

If you pay a chartered accountant, lawyer, consultant, designer or IT contractor, section 194J of the Income Tax Act 1961 may require you to deduct tax at source before you release the payment. This guide explains who must deduct, the 10 percent and 2 percent rates, the new Rs 50,000 threshold for FY 2025-26 (AY 2026-27), and how a freelancer claims that money back.

The single biggest mistake businesses make is applying 10 percent to everything. The Act splits the rate by the nature of the service.

📌 The 2 percent rate for FTS was reduced from 10 percent with effect from FY 2020-21. In TDS returns these appear as code 194JA (the 2 percent payments) and 194JB (the 10 percent payments). These are reporting labels, not separate sections of the Act; the rate split itself sits inside section 194J.

Section 194J of the Income Tax Act 1961 governs tax deducted at source on fees for professional or technical services, royalty, non-compete fees, and director remuneration other than salary.

• Professional services include medical, legal, engineering, architectural, accountancy, technical consultancy, interior decoration and advertising work.
• Technical services mean managerial, technical or consultancy services, but not work taxed as salary.
• Section 194J is regime-independent. The old-versus-new regime choice affects only the payee's final tax, not the deduction.

If you are a freelancer, also read how presumptive taxation works at Presumptive Taxation under 44AD and 44ADA, because the income on which 194J was deducted is the same income you declare there.

1. Companies, firms, LLPs and trusts that make these payments must deduct, regardless of size.
2. Individuals and HUFs must deduct only if they were liable to a section 44AB tax audit in the preceding financial year, that is, business turnover above Rs 1 crore or professional receipts above Rs 50 lakh.
3. A salaried person paying a CA for personal return filing is not required to deduct, as it is not a business payment.

Once liable, you must deduct at the earlier of credit in your books or actual payment, deposit it by the due date, file the quarterly TDS return, and issue Form 16A to the payee.

TDS is not a final tax. It is an advance toward the payee's yearly liability.

1. The deductor deposits the TDS and files the return; it then appears against the payee's PAN in Form 26AS and the Annual Information Statement (AIS).
2. The payee files the correct return, usually ITR-3 or ITR-4, and claims the deducted amount as credit. See Which ITR Form To File 2026-27.
3. If the deducted tax is more than the final liability, the difference is refunded with interest.

Always reconcile your books with Form 26AS and AIS before filing. If an entry is missing or wrong, follow How To Dispute An AIS Mismatch. Freelancers carrying trading losses alongside professional income should also see F&O Loss Tax Treatment in ITR-3.

• Charging 10 percent on technical services. FTS and call-centre payments attract 2 percent, not 10 percent.
• Treating the threshold as a single Rs 50,000. It is per category per year, not per bill, and not pooled across categories.
• Forgetting the nil threshold on director remuneration. Sitting fees and director commission are deducted from the first rupee.
• Ignoring the no-PAN rule. Without a valid PAN, deduct at 20 percent under section 206AA.
• Assuming the old non-filer surcharge still applies. Section 206AB, which charged higher TDS on ITR non-filers, was omitted with effect from 1 April 2025 (FY 2025-26), so it does not apply for AY 2026-27.

If a deductor has cut your TDS but it is not reflecting in Form 26AS, you can raise a TRACES grievance, and for a public-authority deductor you may file an RTI. Draft a clean request fast with the AI RTI Draft tool.

• To: The Public Information Officer, [Department / PSU name]
• Subject: Information on TDS deducted under section 194J in FY 2025-26
• Body: Please provide (a) the date and amount of TDS deducted under section 194J on my invoice number ___, (b) the challan and date of deposit with the government, and © the quarter in which it was reported in the TDS return against my PAN.

For the full process of drafting, filing and appealing, keep The RTI Playbook handy.

The standard rate is 10 percent on professional services, royalty, non-compete fees and director remuneration. A reduced rate of 2 percent applies to fees for technical services and to call-centre operators. Without a PAN, the rate is 20 percent.

TDS is required only once total payment in a category crosses Rs 50,000 in the financial year. Budget 2025 raised this from Rs 30,000, effective 1 April 2025. Director remuneration has no threshold.

Only if they were under a section 44AB tax audit in the previous year, meaning business turnover above Rs 1 crore or professional receipts above Rs 50 lakh. Ordinary salaried individuals do not deduct.

Yes. Section 194J is regime-independent. The deduction is made the same way regardless of which regime the payee chooses; the regime affects only the payee's final tax computation.

Reconcile it in Form 26AS and AIS, file your return claiming the TDS as credit, and any excess is refunded.

• Income Tax Act 1961, Section 194J
• Finance Act 2025, Clause 60 (threshold raised to Rs 50,000) and omission of Section 206AB w.e.f. 1 April 2025
• Section 206AA (higher TDS where PAN not furnished)

This guide is general information for AY 2026-27 and not a substitute for professional tax advice. Reviewed by the editorial desk of Dr. Shrawan Kumar Pathak.