TaxTMI 
TaxTMI 
Clear, consolidated, and modernized framework of TDS on payments relating to professional and technical services : Clause 393(1)[Table: S.No. 6(iii)] and 393(4)[Table: S.No. 9] of the Income Tax Bill, 2025, Vs. Section 194J of the Income-tax Act, 1961
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Tax Bill, 2025, which propose to overhaul and consolidate the TDS provisions applicable to payments for professional and technical services, as well as the corresponding exemption for personal payments by individuals and Hindu undivided families (HUFs). The analysis is juxtaposed with the existing regime under section 194J of the Income-tax Act, 1961, which has, for decades, governed the TDS obligations on such payments. The commentary will dissect the legislative intent, the structure and scope of the new provisions, their practical implications, and areas of continuity and divergence from the established law. This analysis is particularly significant in light of the ongoing efforts to simplify and rationalize the direct tax code in Indi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onal services * (b) Fees for technical services * (c) Remuneration or fees or commission (other than those on which tax is deductible u/s 392) to a director of a company * (d) Royalty * (e) Any sum referred to in section 26(2)(h) The rates prescribed are: * 2% for (i) fees for technical services (not being professional services), (ii) royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films, (iii) payee engaged only in the business of operation of call centre * 10% in all other cases The threshold limit for deduction is Rs. 50,000 in aggregate during the tax year. Interpretation and Key Features: * Specified Person: The term is not defined in the extract, but typically refers to e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve Simplicity: This relieves a significant compliance burden from laypersons who may engage professionals for personal reasons (e.g., legal, medical, architectural services). * Consistency with Existing Law: This mirrors the third proviso to Section 194J, which provides a similar exemption. Comparison with section 194J of the Income-tax Act, 1961 Section 194J, as it stands post-amendments by the Finance Act, 2025, requires any person (other than an individual or HUF, unless their turnover exceeds specified limits) responsible for paying to a resident any sum by way of fees for professional or technical services, director's remuneration (except salary), or royalty, to deduct TDS at the following rates: * 2% on fees for technical se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....whereas Section 194J, as amended, also applies Rs. 50,000 to each category but lists them separately. * The Bill's language may allow for aggregate computation across all types of payments under S.No. 6(iii), subject to clarification in rules or judicial interpretation. D. Applicability to Individuals and HUFs * Similarity: Both regimes exempt individuals and HUFs from TDS obligations unless they cross a turnover threshold (Section 194J) or are "specified persons" (Bill). * Difference: * Section 194J explicitly uses the turnover criteria (Rs. 1 crore for business Rs. 50 lakh for profession in preceding year). The Bill uses the term "specified person," which may be defined by reference to turnover or other criteria. The actual i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TDS in certain cases. The Bill's structure appears to streamline such declarations and their submission to tax authorities. * Adjustment for Excess/Short Deduction: Both permit adjustment of TDS for excess or shortfall during the year. Structural Comparison Aspect Clause 393(1)[Table: S.No. 6(iii)] and Clause 393(4)[Table: S.No. 9] of the Income Tax Bill, 2025 of the Income Tax Bill, 2025 section 194J of the Income-tax Act, 1961 Nature of payments covered Professional services, technical services, royalty, director's fees (not salary), non-compete fees Professional services, technical services, royalty, director's fees (not salary), non-compete fees Rate of TDS 2% (technical services, call centres, royalt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) and fees/commission (covered under this provision) to avoid double deduction or omission. For Individuals and HUFs * Personal Payments: The exemption for personal payments ensures that individuals and HUFs need not grapple with TDS compliance when availing services for personal use, such as hiring a lawyer or architect for personal matters. * Business/Professional Payments: Individuals and HUFs whose turnover exceeds the specified limits will be subject to TDS obligations, requiring maintenance of records and compliance with return filing requirements. For Professionals and Service Providers * Cash Flow Impact: TDS reduces the immediate cash inflow, requiring professionals to claim credit while filing returns. The higher threshold....