When does the 194J threshold reset?

Per financial year, per deductor. So if Client A paid you Rs. 49,000 in March 2026 (no TDS), then Rs. 60,000 in April 2026 — the second payment is in FY 2026-27 and starts a fresh Rs. 50K window. TDS @ 10% kicks in on the first Rs. 1 of that fresh window if cumulative payments are about to cross.

What if the client deducts under 194C (1%) instead of 194J (10%)?

Wrong section, lower deduction — they’ll get a notice and you’ll have to true-up at ITR. For genuinely professional / technical work (design, dev, consulting), 194J is correct. For pure contract / works (data entry, transcription, basic editing), 194C is correct. Push back politely and reference your engagement letter if they’re mis-classifying.

TDS · Glossary

Section 194J

TDS on professional and technical service fees — 10% / 2% with Rs. 50K threshold.

Section 194J of the Income Tax Act, 1961 mandates TDS on payments for professional fees (10%), fees for technical services (2%), royalty, and director fees. Threshold raised from Rs. 30,000 to Rs. 50,000 in Budget 2025 (effective 1 April 2025) per deductor per year.

Deductors: companies, LLPs, partnerships, audited individuals/HUFs. Deductees: residents providing professional/technical services. TDS is computed on the service value EXCLUDING GST per CBDT Circular 23/2017 when GST is shown separately on the invoice.

Worked example

Priya invoices Rs. 1,00,000 + 18% GST = Rs. 1,18,000. Client deducts 194J TDS @ 10% on Rs. 1,00,000 (not the gross Rs. 1,18,000) = Rs. 10,000. Net wire: Rs. 1,08,000.

Practitioner tip

If your client deducts 194J on the GST-inclusive amount (Rs. 11,800 instead of Rs. 10,000), point them to CBDT Circular 23/2017 dated 19 July 2017 — it is unambiguous. Most accidental over-deduction comes from this single mistake.

Frequently asked

When does the 194J threshold reset?: Per financial year, per deductor. So if Client A paid you Rs. 49,000 in March 2026 (no TDS), then Rs. 60,000 in April 2026 — the second payment is in FY 2026-27 and starts a fresh Rs. 50K window. TDS @ 10% kicks in on the first Rs. 1 of that fresh window if cumulative payments are about to cross.
What if the client deducts under 194C (1%) instead of 194J (10%)?: Wrong section, lower deduction — they’ll get a notice and you’ll have to true-up at ITR. For genuinely professional / technical work (design, dev, consulting), 194J is correct. For pure contract / works (data entry, transcription, basic editing), 194C is correct. Push back politely and reference your engagement letter if they’re mis-classifying.

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TDS (Tax Deducted at Source) — Mechanism where the payer withholds and deposits income tax on the payee's behalf.
Form 16A — TDS certificate issued by deductors for non-salary TDS (e.g., 194J, 194C).
Form 26AS — Consolidated annual tax statement showing all TDS, advance tax, and refunds.

Sources

Frequently asked

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