When is tax deducted on a professional fee?
Tax is deducted on a professional or technical fee under section 194J at the earlier of credit and payment. Professional fees are deducted at 10 percent. Technical services and a call centre are deducted at 2 percent. From 1 April 2025 the deduction starts when the year’s payments cross ₹50,000. In 2024-25 that line was ₹30,000. A fee to a director that is not salary has no threshold.
When is it deducted?
Professional services include legal, medical, engineering, architectural, accountancy, and the other professions the section names. The payer deducts if the payer is a person other than an individual or a Hindu undivided family, or is an individual or a Hindu undivided family that was liable to audit under section 44AB in the preceding year. Cash is not an escape. The section applies whichever way the fee is paid.
Which rate applies?
| Payment | Rate | Threshold |
|---|---|---|
| Professional fees | 10 percent | ₹50,000 from 1 April 2025. ₹30,000 in 2024-25 |
| Technical services, or a call centre | 2 percent | The same year’s threshold |
| A director’s fee, other than salary | 10 percent | None |
The rates for the year that ended on 31 March 2025 are on the 2024-25 chart. The payee’s credit is in Form 26AS. The certificate for this deduction is Form 16A. If the payee does not furnish a PAN, the deduction is at the higher of the section rate and 20 percent.
What is a different section?
Commission or brokerage is section 194H. A purchase of goods is section 194Q. Salary paid to a director as an employee is section 192, not this section. An individual or a Hindu undivided family that is not under the audit test, and that pays a professional more than ₹50 lakh in the year, looks at section 194M. That is not section 194J.
Frequently asked questions
Four questions cover the threshold, the 2 percent rate, an individual payer, and commission.
Is there no threshold?
There is a threshold for professional and technical fees: ₹50,000 in a year from 1 April 2025, and ₹30,000 in 2024-25. A fee paid to a director, other than salary, has no threshold.
Is every fee deducted at 10 percent?
No. Professional fees are 10 percent. Fees for technical services, certain royalty for a cinematographic film, and a call centre are 2 percent.
Does an individual always deduct?
No. An individual or a Hindu undivided family deducts under section 194J only if that person was liable to tax audit under section 44AB in the preceding year.
Is commission under this section?
No. Commission or brokerage is section 194H. A purchase of goods is section 194Q.
Sources
Fees for professional or technical services are section 194J of the Income-tax Act, 1961. The threshold rose on 1 April 2025. Commission is section 194H.