TDS on Professional Fees and Technical Services
Tax deduction at source applies to specified payments to residents for professional services, technical services, certain director payments, royalty and related sums. From 1 April 2026, these non-salary TDS provisions are consolidated in Section 393 of the Income-tax Act, 2025. Legacy Section 194J remains relevant to transactions governed by the Income-tax Act, 1961.
Payments covered by the professional and technical services rule
The provision covers specified payments to a resident, including fees for professional services, fees for technical services, remuneration or fees or commission to a company director other than salary, royalty, and specified non-compete or similar sums covered by the corresponding business-income provision.
Current TDS rates
Under Section 393(1), Table Serial No. 6(iii), the rate is 2 percent for fees for technical services that are not professional services, royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films, and a payee engaged only in the business of operating a call centre. The rate is 10 percent in the other covered cases, including fees for professional services.
Current monetary threshold
The current Section 393 table specifies a Rs. 50,000 threshold for the relevant professional services, technical services, royalty and specified business-payment categories. The director remuneration, fees or commission category has no monetary threshold under the table. The threshold must be applied to the correct statutory category and payee.
When is TDS deducted?
Tax is generally deducted at the earlier of credit of the sum to the payee or payment by any mode. A credit to a suspense account or another account in the payer's books may be treated as a credit to the payee under the statutory deeming rule.
Meaning of professional services
Professional services include services rendered in the course of carrying on the legal, medical, engineering or architectural profession, accountancy, technical consultancy, interior decoration, advertising, and other professions notified for the purpose of the TDS provision.
Meaning of fees for technical services
Fees for technical services takes its meaning from the substantive provision dealing with technical-service income. It broadly concerns consideration for managerial, technical or consultancy services, subject to the statutory inclusions and exclusions. The precise definition should be applied before classifying a payment merely by its commercial description.
Meaning of royalty
Royalty is also a defined expression for income-tax purposes. It includes specified consideration connected with intellectual property, rights, information and other matters falling within the statutory definition. Section 393 applies different rates to cinematographic-film royalty and other covered royalty payments, so correct classification is important.
Director remuneration, fees or commission
Payments to a company director by way of remuneration, fees or commission that are not salary are included in this TDS category. The Section 393 table provides no monetary threshold for this director-payment item. Salary paid to a director is governed by the salary TDS provision instead.
Individuals and HUFs
The ordinary professional and technical services TDS rule can apply to an individual or HUF when the statutory business or professional conditions are satisfied. A separate Section 393 table item also deals with certain high-value payments by individuals or HUFs who are outside the ordinary contractor, commission and professional-fee TDS categories. The payer should therefore identify the correct table item before deducting and reporting tax.
Personal-purpose exception
The legacy Section 194J rule excluded qualifying professional-service payments made exclusively for the personal purposes of an individual or a member of an HUF in the circumstances specified by that provision. For current transactions, the corresponding Section 393 payer conditions and exceptions should be checked directly.
Transition from Section 194J to Section 393
| Credit or payment | Applicable law | Provision |
|---|---|---|
| On or before 31 March 2026 | Income-tax Act, 1961 | Section 194J, where its conditions are satisfied |
| On or after 1 April 2026 | Income-tax Act, 2025 | Section 393(1), relevant Table Serial No. 6 item |
The Income Tax Department's transition guidance states that a sum paid or credited on or before 31 March 2026 is governed by the 1961 Act, while a sum paid or credited on or after 1 April 2026 is governed by the corresponding withholding provision of the 2025 Act.
Legacy Section 194J of the Income-tax Act, 1961
The uploaded historical text records a Rs. 30,000 threshold for professional services, technical services, royalty and the specified Section 28(va) sum. It records 2 percent for technical services other than professional services, specified cinematographic-film royalty and call-centre cases, and 10 percent in other cases. These legacy figures should be applied only to the period for which the 1961 Act governs the transaction.
Legacy payer condition for individuals and HUFs
The source provision required an individual or HUF to deduct under Section 194J where the preceding financial year's business turnover exceeded Rs. 1 crore or professional gross receipts exceeded Rs. 50 lakh, subject to the personal-purpose exception for professional services.
Legacy suspense-account rule
Where a covered sum was credited to a suspense account or another account in the books of the person liable to pay it, Section 194J treated that credit as credit to the payee for TDS purposes.
Practical compliance checklist
Confirm residence: this resident-payee table should not be used automatically for payments to non-residents.
Classify the service: distinguish professional services from technical services and royalty because the applicable rate can differ.
Check director payments: separate salary from non-salary remuneration, fees or commission.
Apply the correct threshold: use the threshold for the particular Section 393 category; the director-payment item has no general monetary threshold.
Check payer status: determine whether the payer falls within the ordinary TDS category or a separate individual/HUF provision.
Use the earlier event: deduct at the statutory credit/payment point, including any applicable suspense-account deeming rule.
Report the current section: for post-1 April 2026 transactions, quote the relevant Section 393 table item rather than Section 194J.
Related Income Tax provisions
Payments to contractors: legacy Section 194C
Commission, brokerage and property TDS
Interest other than interest on securities: legacy Section 194A
Rent TDS: legacy Section 194-I
For an actual payment, verify the precise nature of service, resident status, payer category, current Finance Act, PAN status and any lower or nil deduction certificate.