TDS on Professional & Technical Fees (Section 194J): 10% or 2%? — FY 2026-27

2026-06-09 · 5 min read · by a CA firm

Section 194J (now under Section 393) is where businesses most often get the rate wrong — and the difference is 10% versus 2%. Here is how to apply it correctly in FY 2026-27.

Two rates under one section

Professional services — a CA, lawyer, doctor, architect, engineer or consultant — attract 10%. Technical services, including software development, IT support and call-centre work, attract only 2%. Royalty is generally 10%; director fees (non-salary) are 10% with no threshold.

The most common mistake

Treating a software or IT-support vendor as "professional" and deducting 10% instead of 2%. Most software development and technical support contracts are technical services — so the correct rate is 2%. Over-deducting annoys vendors and creates refund headaches; under-deducting invites a short-deduction notice. Read the contract's nature of service, not the vendor's designation.

Threshold

TDS applies once payments to a payee cross ₹50,000 in the financial year (a separate ₹50,000 limit applies to professional and to technical components). No valid PAN means 20%.

Worked example

You pay a CA firm ₹1,00,000 in professional fees. It crosses ₹50,000, so deduct 10% = ₹10,000. If instead you paid ₹1,00,000 to a software vendor for development work, the correct rate is 2% = ₹2,000.

Not sure which applies to your payment? The TDS Wizard asks whether it's professional or technical and gives you the exact rate, code and due date. Full detail on the 194J guide.

This article is general information for FY 2026-27, not advice for your specific case. Verify against the latest law or talk to a CA.