Pay a CA, lawyer, consultant, doctor, or IT support vendor above a certain amount, and you're on the hook to deduct TDS before you pay them — get it wrong and it's not just interest, a full 30% of that expense can get disallowed from your own taxable income. Here's how the current rules work, including the threshold that changed in 2025.
Quick Summary
- Professional services (CA, legal, medical, engineering etc.): 10% TDS
- Technical services / call-centre payments: 2% TDS
- Threshold: ₹50,000/year per payee (raised from ₹30,000, effective 1 Apr 2025)
- No PAN: rate jumps to 20%
- New Act section: 393(1) (old Section 194J)
- Non-deduction penalty: 30% of the expense disallowed, plus interest
Rates — Professional vs Technical Services
| Payment Type | Examples | TDS Rate |
|---|---|---|
| Professional services | CA, lawyer, doctor, architect, engineer, interior decorator | 10% |
| Technical services | IT support, technical consultancy, call-centre operations | 2% |
| No PAN provided | Either category | 20% |
The Threshold Just Went Up — ₹30,000 to ₹50,000
The Finance Act 2025 raised the no-TDS threshold from ₹30,000 to ₹50,000 per payee per financial year, effective 1 April 2025. This aggregates across all payments to the same person or firm in a year — so ten payments of ₹6,000 each to the same consultant cross the ₹50,000 threshold and require TDS on the full amount, even though each individual payment looked small.
Who Must Deduct
- Companies, partnerships, and LLPs — always, regardless of size
- Individuals/HUFs with business turnover above ₹1 crore, or professional receipts above ₹50 lakh, in the immediately preceding financial year
- Individuals/HUFs below these limits generally don't need to deduct TDS on professional payments they make personally
Deposit, Returns & Certificates
- Deposit TDS by the 7th of the following month (March deductions: by 30 April)
- Report quarterly in Form 140 (old Form 26Q)
- Issue Form 131 (old Form 16A) to the payee, downloaded from TRACES after the quarterly return is filed
The Real Cost of Getting This Wrong
If you fail to deduct TDS on a professional or technical payment that required it, 30% of that expense gets disallowed when computing your own business's taxable income — often a far bigger hit than the TDS amount itself, on top of 1% monthly interest for non-deduction and the possibility of penalty proceedings. This is why it's worth tracking cumulative payments to each vendor across the year, not just checking each invoice in isolation.
TDS Compliance Support
Rajput Lalit & Associates helps businesses track vendor payments, deduct TDS correctly, and file quarterly TDS returns on time. Book a free consultation or see our TDS Return Filing service.
Frequently Asked Questions
What's the TDS rate for professional fees vs technical fees?
10% for professional services — this covers CAs, lawyers, doctors, engineers, architects, and similar professionals. 2% for technical services and for call-centre payments. Both fall under the same section (new Section 393(1), old 194J) but carry different rates depending on the exact nature of the service, so classifying a payment correctly matters.
What is the threshold below which no TDS is needed?
₹50,000 per payee in a financial year, for the aggregate of payments in that category (professional fees, technical fees, royalty, or Section 28(va) receipts). This was raised from ₹30,000 by the Finance Act 2025, effective 1 April 2025 — a meaningful relief for anyone paying occasional, small professional fees who previously crossed the lower threshold easily.
Who is required to deduct this TDS?
Companies, partnerships, LLPs, and any individual or HUF whose business turnover exceeded ₹1 crore or professional receipts exceeded ₹50 lakh in the immediately preceding financial year. An individual below these limits paying a CA or lawyer generally doesn't need to deduct TDS on that payment.
What if the payee doesn't provide their PAN?
The rate jumps to 20%, regardless of whether the payment is for professional or technical services. This is a significant jump from the standard 10%/2% rates, so collecting PAN details before making the payment (or at least before the TDS is due) avoids an unnecessarily large deduction.
By when must this TDS be deposited and reported?
Deposit by the 7th of the following month (for March deductions, by 30 April). It's reported quarterly in what was Form 26Q, now Form 140, and the TDS certificate — formerly Form 16A — is now Form 131, downloaded from TRACES after the quarterly return is filed.
What happens if a business doesn't deduct TDS on professional fees it pays?
30% of that expense gets disallowed when computing the payer's taxable business income — a real cost even beyond the TDS itself — on top of 1% monthly interest for non-deduction and possible penalty proceedings. This disallowance is often the bigger financial hit than the TDS amount itself, which is why it's worth getting right even for occasional professional payments.
Disclaimer: This article is for general information based on the Income-tax Act, 2025 (Section 393(1), corresponding to the old Section 194J) and the Finance Act 2025 threshold change, as applicable from 1 April 2025/2026 and current as of September 2026. Please verify the latest position or consult a professional for your specific situation before relying on it.