Reduction in TDS rate on fees for technical services u/s Section 194J at par with Section 194C

Reduction in TDS rate on fees for technical services u/s Section 194J of the Income Tax Act

Reduction in TDS rate u/s Section 194J 

Section 194J of the Income Tax Act provides that a person other than an individual or a HUF who is responsible for paying to a resident any sum by way of fees for professional services, or fees for technical services, or any remuneration or fees or commission by whatever name called (other than those on which tax is deductible under section 192 of the Act, to a director),
or royalty or any sum referred to in clause (va) of section 28, shall, at the time of payment or credit of such sum to the account of the payee, deduct an amount equal to ten per cent as income-tax.

Section 194C of the Act further provides that any person responsible for paying any sum to a resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract shall at the time of payment or credit of such sum deduct an amount equal to one per cent in case payment is made to an individual or a HUF and two per cent in other cases.

In view of the large number of litigations on the issue of short deduction of tax treating assessee in default where the assessee deducts tax under section 194C, while the tax officers claim that tax should have been deducted under section 194J of the Act.

Therefore in order to reduce the litigation, the Union Budget 2020 has proposed to reduce rate for TDS in section 194J in case of fees for technical services (other than professional services) to two per cent from existing ten per cent.

The TDS rate in other cases under section 194J would remain same at ten per cent.

This amendment will take effect from 1st April, 2020

• Object of assessment proceedings is not to find empirically correct solution on every fact issue – HC
• Penalty u/s 270A deleted as assessee filed revised computation during scrutiny
• Penalty u/s 271B for unfilled column 40 in Tax Audit Report Form 3CD deleted by ITAT
• Merely ex-parte rectifying computation without amending assessment order not make it nullity- ITAT
• Once assessee discharges primary onus, it shifts to AO to bring evidence to contrary – ITAT