TDS on Professional Fees: 194J Rate and Threshold (2026)

If you pay a resident professional more than ₹50,000 in a financial year, you deduct TDS at 10% (2% for technical services) and deposit it with the government. The ₹50,000 limit applies from 1 April 2025, when the Finance Act 2025 raised it from ₹30,000, and it is counted separately for each category of payment. If the payee has not given a PAN, the rate is 20%.

One thing has changed that most articles have not caught up with: from 1 April 2026 the Income-tax Act, 1961 was replaced by the Income-tax Act, 2025, and the provisions people still call "Section 194J" now sit in the TDS table under Section 393 of the new Act. The rates and threshold carried over. The section number on your forms and in your software did not.

The rates, in one place

• Fees for professional services — legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration, advertising and other notified professions: 10%.
• Fees for technical services (other than professional services), and certain payments to call centres: 2%.
• Royalty and non-compete fees: 10%, except royalty for the sale, distribution or exhibition of films, which is 2%.
• Directors' fees, commission or sitting fees not taxed as salary: 10%, with no threshold.
• Payee without a PAN: 20%.

How the ₹50,000 threshold actually works

The limit is per payee, per category, per financial year. If your auditor charges ₹40,000 in the year, no TDS. If they charge ₹40,000 in April and ₹20,000 in October, the total crosses ₹50,000 and you deduct on the payment that takes it over — and, in practice, on the amounts before it, because the obligation is for the year's payments once the limit is crossed. This is where most small businesses go wrong: they check each bill against the threshold, see that each one is small, and never deduct.

The categories are counted separately. ₹45,000 of professional fees and ₹45,000 of technical fees to the same firm do not add up to ₹90,000 for this purpose.

Who has to deduct

Companies, firms and LLPs deduct regardless of size. An individual or HUF has to deduct only if their business turnover or professional receipts crossed the tax-audit limits in the previous year. And an individual paying for purely personal purposes — your own lawyer for a family matter — does not deduct at all.

When to deposit, and what to file

TDS is deducted at the earlier of crediting the amount to the payee's account in your books or paying it. It is deposited by the 7th of the following month (30 April for amounts deducted in March), reported in the quarterly TDS return for non-salary payments, and the payee is given a TDS certificate each quarter. Late deposit carries interest for every month or part of a month; a late return carries a fee per day. Those costs are small one at a time and large when nobody noticed for a year.

Who this does not apply to

Payments to non-residents fall under different provisions entirely. Salary to employees is TDS on salary, not this. And payments for goods, rent or contract work have their own sections and rates — a common mistake is deducting 10% on a contractor's bill that attracts the contract-work rate instead.

A test you can run this week

Pull every vendor you paid in this financial year and filter to accountants, lawyers, consultants, designers, IT service firms and directors. Add up each one's payments so far. Anyone above ₹50,000 with no TDS against them is a default that is still accruing interest. Anyone close to ₹50,000 is the next one.

Grovia's TDS feature is built for exactly this check, and it is off until you switch it on. Each rate rule holds its section, the rate, the higher no-PAN rate, and the single-bill and annual thresholds; the rates Grovia ships with stay marked unverified until your CA confirms them. When you pay a bill net of tax it records the deduction, keeps lower-deduction certificates against their limit, and builds a quarterly register with the deposit due dates and a CSV your CA can use for the return. It does not file the return or generate the challan.

Grovia is a business platform built for Indian service companies — leads, quotations, invoicing, projects, HR and support in one place. Start a free trial and see whether it fits the way you already work.

Figures checked on 27 October 2026. Tax and labour rules change; confirm the current position with your CA before you act on it.

Frequently Asked Questions

What is the TDS rate on professional fees?

10% for professional services, royalty and directors' fees, and 2% for fees for technical services. If the payee has not provided a PAN, the rate is 20%.

What is the threshold for TDS on professional fees?

₹50,000 per payee, per category, in a financial year, from 1 April 2025. It was ₹30,000 before. Directors' fees have no threshold.

Is Section 194J still valid after April 2026?

The rules continue, but the Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026, and these payments now fall under the TDS table in Section 393. Use the new section references on returns and certificates from that date.

Do I deduct TDS on the GST part of a professional's bill?

Where the GST amount is shown separately on the invoice, CBDT's long-standing position is that TDS is deducted on the amount excluding GST. If the bill shows one combined figure, deduct on the whole.

When must TDS on professional fees be deposited?

By the 7th of the month after deduction, except for deductions made in March, which are due by 30 April.