Section 194J – Fees for professional or technical services

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With respect to sec 194j the subtraction of TDS at source also known as Tax Deducted at source has been considered as of a great help and assistance in accumulation of taxes in the entire nation by focusing on income source at first hand. It sincerely helped both, taxpayers and the administering body (government). It however helps the government by reducing escape or avoidance of paying tax either by organisations or individuals.

section 194j

It results the continuous flow of tax in a year rather than restricting the collection of taxes only at a given period of time, in India it is month of March-April. Nevertheless it helps ease the payment of a certain amount of tax to the taxpayers as a petty amount is deducted at source itself.  Therefore it will help in better understanding sec 194j of income tax act.

Discussion

One of the most significant and frequent types of payments that a business organizations makes is towards the executive charges or charges for technical services. Some of the explanatory instances of tds on professional fees is the charge paid to the doctor, engineer, chartered Accountant. advertisers, media, interior decorators etc.These services would incorporate the technical, managerial or consultant services and solutions provided.

So in this blog we will come across the various aspects relevant to TDS and tds 194j on the amount i.e charges and fee paid or remitted for technical or professional services

1.Varieties of payments we’re gonna cover

  1. Executive fee.
  2. Charges for technical Services offered.
  3. Board meeting attendance fee (directors, chairperson).
  4. Royalty
  5. The payments received for not disclosing reason of business operations or technical know hows.

2. Doorstep for Deducting Tax

The tax amount is to be subtracted increase the amount of payment exceeds a figure of 30000 annually. Nevertheless there are no limitations for payments remunerated to the director of the firm. As the tax will be subtracted no matter how petty the amount is.

3. Individuals accountable for tax deduction

Any individual who is making a transaction for professional or executive services is answerable for tax deduction at source by the following guidelines/protocols

  1. In a scenario where the person is running a business wherein the total business operation amount (turnover) exceeds 1 crore in a financial calendar.
  2. A person who owns a business where the business operations amount (turnover) in the previous year was nearing to an amount of 5 million.

Simply this does mean any person who is earning a salary which comes under tax slab and running a small or gigantic business who come under the above criteria are all liable to pay taxes.

4. Outlay for deduction of Tax

A handful of the payments which is covered in the above criteria are liable to pay 194j tds at a standard rate of 10%.

Nevertheless according to the World Economic Federation (W.E.F) on 01.04.2017 said that the tax amount on the liquidation transferred to the managers of call centers are subtracted at a substantially low rate of 2%. If a person who is receiving the payment does not update the PAN details that the deduction rate will be 20%.

5. At what time does the tax gets debited?

The tax does gets withdrawn at every moment whenever there is a new entry in the accounts ledger or in a case wherein the authentic payment of the expenditure is made.

6. Aftermath of no deduction or delayed deduction

No deduction of the tax or delayed withdrawal of tax has 2 types of out-turns

  1. Turndown of a unit of the cost i.e. 30% of the amount is probably going to be turned down in the year wherein the costs are going to be rushed back to the book of accounts. Therefore nearly the 30% amount which was disallowed will then be allowed in the year in which 194j of income tax amount was transferred or paid to the government.
  2. The excise of interest as far as the day of payment that needs to be done. In such a scenario there is a wait in the tax payment, along with the interest because of the delayed tax payment including the section 194j to the governing body (government).

7. The rate of interest is regulated by the following method

(a) Incase there has been no deduction of tax at all:-

The interest amount which is tpo be paid is 1% every month or every alternate month right from the date on which the tax was supposed to be paid right till the date of authentic deduction.

(b) At places where the amount had been deducted but not transferred to government

In such a case the amount or interest would be 1.5% every month right from the date on which the tax was supposed to be paid right till the date of authentic deduction.

Conclusion

So with the above information one can for sure understand the basic structure of how the TDS works in the system as well as flow of taxation in the government framework and 194j.