Section 194J TDS on Professional & Technical Fees: Complete Guide

Under the Income Tax Act, 1961, businesses in India are required to deduct Tax Deducted at Source (TDS) when paying for services rendered by professionals, technical experts, or consultants. This is regulated under Section 194J, and keeping track of these deductions in Tally is key for your quarterly Form 26Q filings.

What is Section 194J?

Section 194J governs TDS on payments made to resident individuals, firms, or companies for:

• Professional Services: Services rendered in legal, medical, engineering, architectural, accountancy, or advertising fields.
• Technical Services: Managerial, technical, or consultancy assistance.
• Royalty: Payments for copyrights, patents, or intellectual property rights.
• Non-Compete Fees: Payments made to restrict a person from carrying out competitive trade.

Section 194J TDS Slabs & Rates

TDS rates under Section 194J are split based on the nature of the service provided:

Key Compliance Rules

• The ₹30,000 Threshold: TDS is not required if the total payment to a professional does not exceed ₹30,000 in a single financial year. However, once the cumulative payment crosses ₹30,000, TDS must be deducted on the entire amount from Rupee One, not just the excess.
• PAN Requirement: Under Section 206AA, if the deductee does not provide a valid PAN card, the TDS deduction rate rises to a flat 20%.
• Payment Timeline: TDS must be deducted at the time of credit to the payee's account or actual payment, whichever is earlier. The deducted tax must be paid to the government bank accounts on or before the 7th day of the following month (30th April for the month of March).

How to Set Up and Record 194J TDS in Tally Prime

Tally Prime can calculate and deduct TDS automatically during purchase voucher creation. Follow this configuration flow:

Step 1: Enable TDS in Company Settings

Go to F11 (Features) > Set "Enable Tax Deducted at Source (TDS)" to Yes. Enter your company Tan Registration Number and TAN details.

Step 2: Create a TDS Nature of Payment

Go to Gateway of Tally > Create > TDS Natures of Payment. Name it "Professional Fees u/s 194J", set Section to "194J", Payment Code to "94J", and enter the Rate (10% or 2%).

Step 3: Configure Expense and Vendor Ledgers

Open your "Audit Fees" or "Consulting Charges" ledger under Indirect Expenses, set Is TDS Applicable to Applicable, and select the nature of payment. In the Vendor Ledger (Sundry Creditors), select the deductee type (e.g., Company Resident) and ensure the PAN number is entered.

Step 4: Record the Journal/Purchase Voucher

When you record a Journal Voucher (`F7`) debiting Audit Fees, Tally will automatically calculate the 10% TDS and credit the TDS ledger, leaving the net payable amount in the vendor ledger.