TDS on Professional and Technical Fees under Section 194J for FY 2025-26: ₹50,000 Limit, 10% and 2% Rates, and the 194C/194J Line

Section 194J covers the fees a business pays for expertise: the chartered accountant, the lawyer, the architect, the consultant, the software developer, the designer, the doctor on retainer, the director drawing sitting fees. Since 2020 it has carried two rates rather than one, and since April 2025 a higher threshold. The rate you choose is not a rounding question. It is read by the department against the recipient’s return, and a mismatch on either side now produces a scrutiny questionnaire — we see it from the recipient’s end every month in the 44AD-versus-44ADA notice, where the deductor’s 194J code is the department’s first exhibit.

This is the FY 2025-26 position for the deductor.

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The limits and rates for FY 2025-26

Nature of payment	Threshold (per financial year, per category)	Rate
Fees for professional services — 194J(b)	More than ₹50,000	10%
Fees for technical services — 194J(a)	More than ₹50,000	2%
Royalty (other than on cinematographic films)	More than ₹50,000	10%
Royalty for sale, distribution, or exhibition of cinematographic films	More than ₹50,000	2%
Non-compete fees under Section 28(va)	More than ₹50,000	10%
Director’s fees, sitting fees, or remuneration not taxed as salary	No threshold	10%
Payee operating a call centre	More than ₹50,000	2%
No PAN furnished (Section 206AA)	—	20%

The threshold was ₹30,000 until 31 March 2025 and is ₹50,000 from 1 April 2025. It applies separately to each category — a payee can receive ₹45,000 of professional fees and ₹45,000 of royalty in the year with no TDS on either. Once a category crosses ₹50,000, TDS applies to the whole of that category’s payments in the year. The base excludes GST where it is shown separately.

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Professional services or technical services — which rate?

Professional services (10%) are the services of the professions specified under Section 44AA(1), and those notified under 194J: legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising, and the notified professions including film artists, company secretaries, authorised representatives, sportspersons and their associates, and — critically for the software sector — information technology professionals.

Technical services (2%) are managerial, technical, or consultancy services, including the provision of technical or other personnel — but excluding construction, assembly, mining, and similar projects, which fall under 194C, and excluding anything that is salary in the recipient’s hands.

The two categories overlap at the edges, and the choice between 10% and 2% is the most common 194J dispute:

Payment	Rate	Why
Audit fee to a CA firm	10%	Accountancy — a specified profession
Retainer to a law firm	10%	Legal — a specified profession
A software developer building your application	10%	Information technology professional — notified profession
Annual maintenance of your ERP by the vendor’s support team	2%	Technical services, not a specified profession
Management consultant advising on strategy	2%	Consultancy — technical services, not a 44AA(1) profession
Engineering consultant designing a plant	10%	Engineering — a specified profession
Recruitment firm supplying technical personnel	2%	Provision of personnel — technical services
Advertising agency’s creative fee	10%	Advertising — specified under 194J
Advertising placement or media buying	194C at 1% or 2%	“Work” — not 194J at all

When a single invoice bundles professional and technical elements and does not separate them, deduct on the whole at 10%.

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The 194C line

Section 194C covers work: contractors, labour supply, transport, catering, job-work, and advertising placement. Section 194J covers expertise. The difference is not the size of the payment or whether the payee is an individual; it is whether you are buying execution of a defined task or the application of professional or technical skill. A civil contractor building your office is 194C at 1% or 2%. The architect who designed it is 194J at 10%. The structural engineer who certified it is 194J at 10%. The interior fit-out contractor is 194C; the interior designer is 194J.

Coding a professional fee as 194C — at 1% instead of 10% — is a short deduction with interest and disallowance consequences for you. Coding a contractor’s payment as 194J is over-deduction that the contractor will ask you to correct. Either way, the mismatch between your 26Q and the payee’s return is now machine-read.

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Who has to deduct

Every company, firm, LLP, trust, cooperative society, and any individual or HUF whose business turnover exceeded ₹1 crore, or professional receipts exceeded ₹50 lakh, in the preceding financial year. Individuals and HUFs below that test do not deduct under 194J — a doctor paying a lawyer, or a salaried person paying an architect for a house, is outside the section — unless they pay a single person more than ₹50 lakh in the year, when Section 194M applies at 2%. Payments by an individual or HUF exclusively for personal purposes are outside 194J regardless of turnover.

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Director’s fees: the threshold that does not exist

Any fee, commission, or remuneration paid to a director that is not salary — sitting fees, board fees, commission on profits to a non-executive director — is under 194J at 10% from the first rupee. There is no ₹50,000 threshold. A company paying ₹5,000 sitting fees for a single board meeting deducts ₹500. Remuneration to a whole-time director that is taxed as salary goes through Section 192 instead.

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When to deduct, deposit, and file

Step	Timing
Deduct	At credit of the invoice to the payee’s account or at payment, whichever is earlier — including credit to a suspense or “provision for expenses” account at year-end
Deposit	By the 7th of the following month; March deductions by 30 April
Return	Form 26Q quarterly — 31 July, 31 October, 31 January, 31 May
Certificate	Form 16A within 15 days of the return due date

The year-end provision is the trap. An audit fee provided for on 31 March, invoiced in May, triggers TDS at the March provision, deposited by 30 April — not with May’s deductions.

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Four worked examples

Example 1 — Below the limit. A company pays a freelance designer ₹45,000 in the year. No TDS — under ₹50,000. Last year’s ₹30,000 threshold would have caught it.

Example 2 — Professional fees. The same company pays its CA firm ₹18,000 a quarter for GST compliance. The third quarter’s payment takes the aggregate to ₹54,000. TDS at 10% on the full ₹54,000 — ₹5,400 — from that payment, and 10% on every payment after.

Example 3 — Technical services. An ERP vendor’s support contract costs ₹1,20,000 a year plus GST shown separately. TDS at 2% on ₹1,20,000 — ₹2,400 — at each credit.

Example 4 — Director’s fees. A non-executive director attends four board meetings at ₹15,000 each. TDS at 10% on every payment — ₹1,500 each — with no threshold.

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What a miss costs

Default	Consequence
Failure to deduct, or short deduction at 2% instead of 10%	Interest at 1% per month on the shortfall from the date deductible
Deducted but not deposited	Interest at 1.5% per month to the date of deposit
Late Form 26Q	₹200 per day under Section 234E, capped at the TDS
Non-filing beyond a year	Penalty of ₹10,000 to ₹1,00,000 under Section 271H
Expense disallowance	30% of the fee disallowed under Section 40(a)(ia)

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Why the section you deduct under now matters to your consultant

A 194J deduction is the department’s evidence that the recipient earned professional income. The recipient who then files under Section 44AD — the presumptive scheme for businesses — has a return that contradicts their own 26AS, and the case is selected for scrutiny with the reason “Substantial receipt u/s 194J and Income shown u/s 44AD instead of 44ADA.” Conversely, a genuine business consultancy paid under 194J at 10% as though it were a specified profession may find itself defending a 44AD return against a 194J code that was never right. Deduct under the correct clause, at the correct rate, and tell the payee which one you used. Both of you will file cleaner returns.

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Frequently asked questions

What is the TDS limit under Section 194J for FY 2025-26?

₹50,000 per financial year, per category of payment, raised from ₹30,000 with effect from 1 April 2025. Professional fees and technical fees are tested separately. Director’s fees have no threshold.

What is the TDS rate on professional fees and technical fees?

10% for fees for professional services — the professions under Section 44AA(1) and those notified, including IT professionals. 2% for fees for technical services, royalty on cinematographic films, and payments to call-centre operators. 20% where the payee has not furnished a PAN.

Is TDS on a software developer 10% or 2%?

10% where the developer is providing information-technology professional services — designing, building, or maintaining software as a professional. 2% where the payment is for technical support or services that are not the exercise of a notified profession, such as a vendor’s annual maintenance contract. When in doubt, and the invoice does not separate the two, deduct at 10%.

Do I deduct TDS on the GST component of a professional invoice?

No, where GST is shown separately on the invoice; deduct on the fee excluding GST. If the invoice shows a single inclusive figure, deduct on the whole.

I am a salaried person paying an architect ₹2 lakh for my house. Do I deduct TDS?

No. Individuals and HUFs deduct under 194J only if their business or professional receipts crossed the audit thresholds in the preceding year, and payments for purely personal purposes are outside the section in any case. Only if you pay a single person more than ₹50 lakh in the year does Section 194M apply, at 2%.

Is there a threshold for TDS on director’s sitting fees?

No. Any fee, commission, or remuneration to a director that is not salary is under 194J at 10% from the first rupee.

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Related reading

• TDS Rate Chart FY 2025-26 (AY 2026-27)
• TDS on Contractors — Section 194C for FY 2025-26
• TDS on Commission & Brokerage — Section 194H for FY 2025-26
• Claimed 44AD Instead of 44ADA? What the Notice Means — and How to Reply
• Outsourced Accounting & Bookkeeping — TDS deposited before the 7th, every month