専門職報酬、技術サービス料、ロイヤリティに対するTDS | 所得税法第194J条

源泉徴収（TDS）は、1961年所得税法（以下「本法」）に基づく主要なコンプライアンスの一つです。これは、所得税局がすべての個人の所得を把握しやすくするとともに、所得発生時に税金の一部を徴収するのに役立ちます。TDSに関連する規定は、本法の第XVII-B章に定められています。

第194J条には、専門職報酬および技術報酬に対するTDSの源泉徴収に関する規定が含まれており、10%のTDS徴収が義務付けられています。ただし、2020年財政法により、第194J条に基づく一部の支払いについては、TDS率が10%から2%に引き下げられました。

1. 第194J条の規定の適用範囲

第194J条では、個人またはヒンドゥー教共同家族（HUF）以外のすべての者に対し、年間に行われる以下の支払いについてTDSを徴収することを義務付けています。

1. 専門的サービスに対する報酬*、または
2. 技術的サービスに対する報酬**、または
3. 第192条に基づき税金が控除される支払い以外の、会社の取締役に支払われる報酬、手数料、またはコミッション、または
4. ロイヤリティ、または
5. 第28条(va)号に規定される金額、

TDSの徴収義務は、年間を通じて受取人に対して行われた、または行われる見込みの支払額の合計が30,000インドルピーを超える場合にのみ発生します。

*専門的サービス 法律、医療、工学、建築、会計、技術コンサルティング、インテリアデザイン、広告などの専門業務を遂行する過程で提供されるサービス。

**技術的サービスに対する報酬 経営、技術、またはコンサルティングサービスの提供に対する対価を意味しますが、受取人が請け負う建設、組み立て、採掘、または類似のプロジェクトに対する対価、あるいは「給与」の形で支払われる対価は含まれません。

2. 第194J条に基づきTDSを徴収する義務がある者

TDSは、個人およびHUF以外のすべての者が徴収する必要があります。ただし、個人およびHUFであっても、前会計年度の総売上高または総収入が1,000万インドルピー（事業の場合）または500万インドルピー（専門職の場合）を超える場合は、第194J条に基づきTDSを徴収する必要があります。

さらに、個人またはHUFが専門的目的の報酬を当該個人またはHUFの構成員の個人的な目的のためにのみ支払う場合、前会計年度の売上高にかかわらず、当該個人またはHUFはTDSを徴収する必要はありません。

3. TDSの徴収率

TDSの徴収義務があるすべての納税者は、以下の税率でTDSを徴収しなければなりません。

1. 技術的サービスに対する報酬（専門的サービスを除く）またはロイヤリティ（当該ロイヤリティが映画の販売、頒布、または上映の対価である場合）-2%

2. 第194J条の対象となるその他の支払い-10%

技術的サービスに対する報酬（専門的サービスを除く）または映画のロイヤリティに対するTDS率は、2020年財政法により2020年4月1日付で10%から2%に引き下げられました。

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4. 第194J条において徴収義務者が直面する課題

2020年4月1日以前、技術的サービスに対する報酬は第194J条に基づくTDSの対象でした。同様に、第194C条では、契約に基づいて遂行されるあらゆる業務（業務遂行のための労働力の供給を含む）に対し、1%（個人またはHUFへの支払いの場合）または2%（その他の者への支払いの場合）のTDS徴収義務が課されていました。

しかし、イベント管理サービス、展示会サービス、写真撮影サービスなど、特定の性質の支払いについては、それらが「技術的サービスに対する報酬」と見なされるべきか、「契約に基づく業務」と見なされるべきかについて混乱が生じていました。

そのため、多くの場合、納税者は当該サービスのTDSを第194C条に基づき1%または2%で徴収していました。しかし、査定官は、該当する支払いは第194J条の対象となるべきであり、したがって10%でTDSを徴収すべきであったと主張し、結果として利息や罰金が課されることとなりました。

Therefore, to reduce litigation and to bring provisions of both sections in sync with each, the Finance Act, 2020 reduces the rate for TDS under section 194J from 10% to 2% for fees for technical services (other than professional services). Therefore, there can be differences of opinion on classification of such payments like under 194C or 194J. However, it will not impact TDS liability of the deductor. 

Further, Difference in tax liability can still arise where payment is made to Individual or HUF as section 194C required deduction of TDS @ 1%. However, section 194J requires deduction of TDS 2%.

5. Amendment in Section 194J by Finance Act, 2020

Finance Act, 2020 amended provisions of Section 194J to reduce rate of TDS from 10% to 2% on following payments with effect from 01.04.2020:

1. Fees for Technical Services* (Not being professional Fee); or
2. Royalties, where such royalty is in nature of consideration for sales, distribution or exhibition of cinematographic films.

TDS on other payments under section 194J is applicable at an original rate of 10%.

6. Explanation as per Memorandum to Finance Act, 2020

As per Clause No. 104 of memorandum to Finance Act, 2020,  to reduce litigation of classification between section 194J or 194C, the Finance Act, 2020 reduces the rate for TDS in section 194J in case of fees for technical services (other than professional services) to 2% from existing 10%. The TDS rate in other cases under section 194J would remain the same at ten per cent. 

7. When does liability to deduct TDS arises under section 194J

Person is liable to deduct TDS at earlier of the following points:

1. at the time of credit of such sum to the account of the payee or 
2. at the time of payment in cash or cheque or draft or by any other mode.

8. Exemption from TDS under Section 194J 

Following persons are not required to deduct TDS under section 194J:

1. Where the aggregate amount of payment made or likely to be made to a payee doesn’t exceed or expected to exceed INR 30,000 during a financial year.
2. Where payment is made by Individual or HUF and their turnover doesn’t exceed INR 1 crores (in case of business) or INR 50 Lacs (In case of profession) during preceding Financial year.
3. Where payment is made by Individual or HUF by way of fee for professional services solely for personal purpose of such individual or any member of HUF irrespective of their turnover.

9. Difference between Technical Service and Professional Service

Before amendment by Finance Act, 2020 in Section 194J, need of differentiation between “Fee for Technical Service” (“FTS”) or “Fee for Professional Service” (“FPS”) generally not arise as both nature of service were subject to TDS at same rate, i.e., 10%. However, Finance Act, 2020 reduced the rate of TDS for FTS to 2% from existing rate of 10% and TDS on FPS is applicable at the same rate of 10%. Now the issue of differentiating a service between FPS or FTS arises.

9.1. Definition of FTS and FPS as per Income Tax Act

• As per Explanation 2 to Section 9(1)(vii) of Income Tax Act, “"fees for technical services" means any consideration (including any lump sum consi-deration) 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"

• As per Explanation (a) to Section 194J of Income Tax Act, "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;

• No separate list of professionals are notified for Section 44AA of Income Tax Act. However, Rule 6F to Income Tax Rules list out a list of certains professionals who are required to maintain books of accounts under Section 44AA(3) of Income Tax Act. Relevant extract of Rule 6F(1) is reiterated below:

“(1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or authorised representative or film artist shall keep and maintain the books of account and other documents specified in sub-rule (2):

….”

• For the purpose of deduction of TDS, we are required to classify a service between FPS or FTS. Certain services are clearly differentiable between professional service and technical service. To say, Service provided by Chartered Accountants, Company Secretary, Doctors, Medical practitioners, Lawyers, Architects etc. are specifically covered under professional service. Whereas services such as event management, professional photography, recruitment companies etc. are not professional but technical services and therefore classified under FTS.

• However, few services are still covered in grey areas such as Information Technology Service, Engineering service or technical consultancy service. At first, these services seem overlapping as FPS includes technical consultancy provided in the course of profession and FTS also includes Technical and consultancy services. Therefore, technical services seem to fall under both the categories. However, if technical consultancy is given in the course of profession then the same is covered under FPS and liable to TDS @ 10%. Whereas, if the same is given otherwise than in the course of profession then the same gets covered under FTS and shall be entitled to TDS @ 2%. 

• Let’s have a look at the detailed interpretation of both services.

9.2 Interpretation of Fee for Professional Service

As per definition given under Income Tax Act, following attributes are required to classify a service as “Professional Services”:

1. Service is provided by a person;
2. Service is provided in the course of carrying out any profession;
3. Such service falls under the list of professions given in definition itself or it falls under any other profession notified for Section 44AA.

These attributes are discussed below in detail:

9.2.1 Service is provided by a person

• Definition of FPS clearly states that “Professional Service” is the one which is rendered by a person. Whereas, no such word is mentioned in the definition of FTS. 
• Section 2(31) of Income Tax Act defines the word “person” as:

“person" includes—

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.

• So, as per definition given, a person can either be an individual or HUF or Firm or any other artificial person. 
• However, activities mentioned in the definition of FPS are more into intellectual and artistic nature and the same can be provided by a person only and not by any artificial person. 

9.2.2. “In course of Carrying out any profession”

• Profession is a business type which requires intellectual skills only. Further, all professional institutions permit their member professionals to practise in the capacity of Individual or Firm (Proprietorship Firm or Partnership Firm or Limited Liability Partnership Firm). Rationale behind such a condition is that artification persons have independent liability from its directors and employees. However, in case of profession, complete onus lies on a person providing service. Therefore, professionals can’t be differentiated from their associated liability and therefore, they are permitted to practise either in individual name or under name of firm.

• Therefore, interpretation can be drawn that services provided by a practising professional in individual capacity or through a firm can be said to be services rendered in course of carrying out profession. However, if service is provided through any artificial person then it can’t be said that such service is provided in professional capacity.

• E.g. If a Chartered Accountant is providing service of Indirect tax Consultancy in his individual professional capacity or through a firm registered with ICAI, then it can be said that such service is provided in the course of profession and will be liable to TDS @ 10%. Whereas, if such chartered Accountant forms a Private Limited company and renders such service then it can't be said that such service is provided in the course of profession as ICAI doesn’t permit practising in name of company and therefore, payment to the company shall be considered as FTS and therefore, shall be liable to TDS @ 2%.

9.2.3 Service falls under the list of professions given in definition itself or it falls under any other profession notified for Section 44AA

• As per definition of FPS, a list of professions are given which are covered for definition of professional service. However, the definition also covers the profession of Technical consultancy. Further,, the definition of FTS also covers technical services.

• In case technical service is obtained then confusion may arise whether it is covered under FTS or FPS. In such a scenario for the purpose of FPS definition, interpretation of words “Technical Consultancy” should  be drawn as per principle of interpretation noscitur a sociis which means meaning of the word should be derived from the company of the words in which it is placed.

• Therefore, for the purpose of FPS, the meaning of the word “Technical Consultancy” should be similar to the meaning of the words mentioned earlier. In the definition of FPS, all earlier mentioned services are related to professional qualification. Therefore, if “Technical Consultancy” is given by a person holding some professional qualification and such service is provided in course of carrying out any profession then it will get covered under FPS and therefore, will be liable to TDS @ 10%. Otherwise, such service will get covered under FTS and will be liable to TDS @ 2%.

10. Summary of Interpretation

11. Conclusion

As differentiation of service between FTS or FPS is a grey area and deduction of less TDS can result in various consequences such as expense disallowance, Interest, penalty etc. Therefore, for services which are clearly differentiable between FTS or FPS, taxpayers should deduct TDS at an applicable rate of TDS, i.e., 2% or 10%.

Further considering the complications involved in determination of nature of service and risk associated on account of lower deduction of TDS, it would be very helpful, if the department comes up with a clarification on what nature of services are covered under FTS and what services are covered under FPS.

Read more on New reduced TDS Rate for Fy 2020-21 | Impact On The Tax Liability