How-to · Tax
TDS on professional fees: the ₹50,000 threshold, 10 per cent, and the section 393 table
When a payer deducts tax on professional or technical fees, why the rate splits at 10 and 2 per cent, the ₹50,000 annual threshold, and how the old 194J duty now sits inside the section 393(1) table of the Income-tax Act, 2025.
In this guide
Tax on professional fees is deducted at 10 per cent, and at 2 per cent for technical fees, cinematograph royalty and a call-centre payee. No deduction is needed if the aggregate to that payee in the year stays within ₹50,000. The earlier of credit or payment decides which Act applies: 194C-era sections until 31 March 2026, the section 393(1) table from 1 April 2026. Rates and thresholds were retained.
What counts as a professional fee
A professional fee is payment for a service that a recognised profession supplies: accountancy, law, medicine, architecture, engineering, interior decoration, advertising, technical consultancy. The payer is the person deducting, and the payee is resident. That is the ordinary case a firm meets every month when it books an auditor's bill or a consultant's retainer.
Two neighbours sit close enough to cause errors. A works contract or supply of labour is a contractor payment at a different rate. Rent for premises or plant is its own row again. Read the description in the section table before you pick a code, not the label your accounting software printed last year.
Why there are two rates, not one
The provision has always carried a split. Fees for professional services are deducted at 10 per cent. A narrower group sits at 2 per cent: fees for technical services that are not professional services, royalty in the nature of consideration for the sale, distribution or exhibition of cinematograph films, and a payee engaged only in the business of operating a call centre.
| Nature of payment | Rate |
|---|---|
| Fees for professional services | 10 per cent |
| Fees for technical services that are not professional services | 2 per cent |
| Royalty for sale, distribution or exhibition of cinematograph films | 2 per cent |
| Payee engaged only in operating a call centre | 2 per cent |
The 2 per cent group is the one people get wrong, because a technical service and a professional service can arrive on the same invoice. If the engagement letter covers both, split the line. A single blended rate is not an option the provision offers.
Where the payee has no PAN, the higher-rate rule applies instead of the table rate. That is a separate machinery provision, and it overrides the 10 or 2 per cent figure.
The ₹50,000 threshold is annual
No deduction is required where the aggregate credited or paid to that payee during the year does not exceed ₹50,000. Two things follow, and both are routinely missed.
- The test is per payee for the whole year, not per bill. Four bills of ₹20,000 to one consultant cross the line at the third one.
- Once crossed, tax applies to the entire amount for the year, not only to the part above ₹50,000. Deduct the shortfall on the invoice that breaks the threshold.
The official TDS Compliance FAQ says the monetary thresholds for all categories of payments were retained when the provisions were consolidated. The threshold is not a casualty of the new Act.
Which Act applies to an invoice
Question 1 of the official TDS Compliance FAQ settles this with the professional-fees case itself. The Act governing the deduction depends on when the earlier of credit or payment occurs. If that earlier event is on or before 31 March 2026, the Income-tax Act, 1961 applies. On or after 1 April 2026, the Income-tax Act, 2025 applies.
So a fee credited in March and paid in April is a March deduction under the old section. Paying it later does not move it. The opposite trap is an advance paid in March against an April invoice, which is also a March deduction.
From April 2026 the deduction cites a row of the section 393(1) table rather than a standalone section number. The FAQ describes the consolidation as a simplified tabular presentation, not a change in rates or policy. Practically, the ERP section code changes and the arithmetic does not.
Salary is the exception to the whole discussion. Salary tax is on payment and sits in section 392, so a whole-time director on payroll is not a professional-fees case at all. See TDS on salary for that path.
How to confirm on official pages
- Read questions 1 to 5 on the official TDS Compliance FAQ. Question 1 is the credit-versus-payment rule and question 3 is the statement that rates and thresholds were retained.
- Open section 393and find the row that describes fees for professional services, then use that row's serial on the return.
- Confirm the deposit and statement dates on the e-Filing portal, then reconcile the payee's credit through 26AS and AIS.
If a rate or threshold is quoted anywhere without a section row behind it, treat it as unverified until you have read the row.
Where Complied AI fits
The rates sit in the Act. What moves is a notified change to the table, a utility update, or a clarification on a borderline service. CBDT updates on Complied AI keep those documents beside section 393, so the person coding the invoice reads the row rather than a memory of it.
Practical checks
Common questions
What is the TDS rate on professional fees?
Ten per cent on fees for professional services. Two per cent applies to fees for technical services that are not professional services, to royalty for the sale, distribution or exhibition of cinematograph films, and to a payee engaged only in the business of operating a call centre. The official TDS Compliance FAQ says rates were retained when the provisions moved into the section 393(1) table.
What is the threshold for deducting tax on professional fees?
No deduction is required if the aggregate credited or paid to that payee during the year does not exceed ₹50,000. The test is annual and per payee, not per invoice. Cross the line and the whole sum for the year is in, not only the excess.
Does a director's sitting fee follow the professional-fees rate?
A director's remuneration that is not salary is deducted under the same head as professional fees, and the ₹50,000 relief does not shelter it. Read the row in the section table for the year you are deducting in, then decide, because a salaried whole-time director is a section 392 salary case instead.
Is a professional fee a contractor payment?
No. A works contract, supply of labour, catering or transport is the contractor row. A chartered accountant, advocate, architect, doctor or technical consultant is the professional row, at a different rate. Putting one on the other's code is a common cause of a correction statement.
Publication method
How this guide was prepared
This guide is published by the Complied AI research desk. Its source list and stated position were checked against the official records shown below on 19 August 2026.
Automation, including AI, may assist research, drafting and structure. It does not replace the official record or amount to an independent professional review. Read our editorial standards and corrections policy.
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