TDS u/s 194J New Threshold limit – TDS on professional and technical services from April 1, 2025
The Finance Act 2025, part of Budget 2025, made an important change to Section 194J of the Income Tax Act, 1961. The amendment increases the TDS deduction limit for professional and technical fees. It goes up from ₹30,000 to ₹50,000. This update starts on April 1, 2025. It will affect businesses and professionals in many sectors.
“ For businesses and professionals, staying informed about tax compliance changes is crucial. Seeking advice from a Tax Consultant Company in Delhi can help ensure smooth tax planning and compliance. ”
Key Amendments in Section 194J
Under Section 194J, all entities must deduct TDS when they pay a resident for these services. This rule does not apply to individuals and Hindu Undivided Families.
- Fees for professional or technical services
- Any payment, fees, or commission to a director (excluding salary under Section 192).
- Royalty payments
- Payments under Section 28(va) (non-compete agreements)
The amendment raises the TDS deduction limit from ₹30,000 to ₹50,000. This change takes effect on April 1, 2025.
Revised Threshold Limits for TDS Deduction (Effective from April 1, 2025)
| S. No. | Nature of Payment | Current Threshold (₹) | Proposed Threshold (₹) |
|---|---|---|---|
| 1 | Fees for professional services | 30,000 | 50,000 |
| 2 | Fees for technical services | 30,000 | 50,000 |
| 3 | Royalty | 30,000 | 50,000 |
| 4 | Any amount under Sec. 28(va) | 30,000 | 50,000 |
Revised TDS Rates under Section 194J (effective from April 1, 2025)
- 2% TDS on technical services and royalty payments for the sale, distribution, or exhibition of cinematographic films.
- 10% TDS applies to:
Professional services
Royalties (excluding those related to films)
Director's remuneration (excluding salary under Section 192)
" To ensure compliance with updated TDS regulations, businesses can avail of TDS return services in Delhi to avoid penalties and streamline tax filing. "
Who must deduct TDS under Section 194J?
Entities (except individuals and HUFs) that pay over ₹50,000 per year for the following services must deduct TDS:
- Fees for professional services
- Fees for technical services
- Remuneration, commission, or fees paid to company directors (excluding salary)
- Royalty payments
- Payments for non-compete agreements under Section 28(va)
If your business turnover exceeds ₹1 crore or your professional turnover is above ₹50 lakh in the previous financial year, you must deduct TDS under Section 194J.
Examples of Payments Covered Under Section 194J
Professional Services:
- Legal fees paid to an advocate or a law firm.
- Accounting and audit fees paid to a chartered accountant.
- Medical consultation fees paid to a doctor.
Technical Services:
- Fees paid to an IT consultant for software development.
- Engineering consultancy services
- Maintenance charges for specialized equipment.
Royalty Payments:
- Payment for the right to use a copyrighted book, music, or software.
- Companies pay licensing fees for patents or trademarks.
Non-Compete Fees (Section 28(va)):
- Payments to a former employee or business partner prevents them from starting a similar business.
- Compensation paid to a company for not entering a particular market.
Implications of this amendment
- Support for Small Businesses and Professionals: The new, higher threshold helps small businesses.
- Lower TDS Compliance: Companies paying less than ₹50,000 do not have to worry about TDS deductions.
- Cash Flow Benefits: Professionals making under ₹50,000 will notice better cash flow. This improvement comes from lower TDS deductions.
" Engaging with the Best Tax Consultation Company in Delhi can help businesses navigate these amendments efficiently and stay compliant. "
Conclusion
The TDS threshold under Section 194J increased from ₹30,000 to ₹50,000. This change benefits small businesses and professionals. This change makes compliance easier for them. This change starts on April 1, 2025. It makes administration easier and improves cash flow. Businesses should update their tax policies and consult experts in Income Tax Return Service in Delhi to ensure compliance with the new TDS regulations. If you're looking for professional guidance, our Tax Consultant Services in Delhi offer comprehensive tax solutions to help you stay compliant with the latest tax laws.
