Question ID : 40635

Fees for Technical Services

Dear Colleagues, How to identify the key difference between Fees for Technical service, technical consultancy, and fees for professional services so as to apply the TDS rate of 2% u/s 194J w.e.f 01.04.2020. As provided in section 194J definition of professional service includes the word technical consultancy and as per the definition of Fees for technical services provided in section 9 also includes the word consultancy in such circumstances how to decide the exact nomenclature of the service and TDS rate thereon whether 2% or 10%?

Explanation (a) to Section194J provides that ‘Professional Services’ means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section. Explanation (b) to Section1 94J provides that “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub­section (1) of section 9, which provides “fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries” Hence, to be a professinal service look at the section 44AA. If the person providing service has qualification mentioned in 44AA, it will be professional service. Other wise test: 1. is it employee if yes- deduct u/s 192 2. if it is royalty, then it is not technical fee. 3. if it is paid to Director, no matter, it is technical or professional, it will be at 10% Hence follow the process of elimination and reach the conclusion.