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Section 194JB was introduced to apply taxes on payments for technical or professional services. It is a part of the existing TDS (Tax Deducted at Source) rules under Section 194 of the Income Tax Act, specifically focusing on royalty and service-based payments.
What Section 194JB Covers
Enacted by the Finance Act 2019, Section 194JB became effective on September 1, 2019. It mandates TDS on fees paid for professional services like medical, architectural, legal, consultancy, or managerial assistance. The TDS rate varies between 2% to 10%.
Tax Rates
The table below details the act and its tax rates:
| Particulars | Tax Deduction (With PAN Card) | Tax Deduction (Without PAN Card) |
|---|---|---|
| Professional Services | 10% | 20% |
| Exceptions Made for Call Centres | 2% | 20% |
| Technical Services | 2% | 20% |
When Section 194JB Applies
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If fees are paid for technical or professional services.
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If the total dividend paid in a financial year exceeds Rs 5,000.
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Applicable to residents, including individuals, AOPs, BOIs, and HUFs.
When Section 194JB Does Not Apply
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If the total dividend is Rs 5,000 or less in a financial year.
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If dividends are paid to HUFs or individuals and do not exceed Rs 5,000.
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If dividends are paid to non-HUF or non-individual residents and remain under Rs 5,000.
TDS Payment Timeline
The table below shows the deadline to deposit the TDS under Section 194JB:
| Time of Payment | Timeline to deposit TDS |
|---|---|
| If the amount is credited in March | By 30th April |
| If the amount is credited anytime apart from March | Within 7 days of receiving the amount |
Penalties for Non-Compliance
Failing to deduct or pay TDS can result in penalties from Rs 10,000 to Rs 1,00,000. An interest rate of 1% per month is also applicable on the unpaid amount.
Summary
All taxpayers must pay taxes on services acquired from resident professionals or technicians. Consulting a financial advisor can help you manage these taxes more effectively. Additionally, keeping track of dividend payments and ensuring timely TDS deposits is crucial to avoid penalties. As Section 194JB continues to evolve, it is important to stay updated on any changes in the TDS rates or regulations. This will help individuals and businesses make informed decisions and comply with the Income Tax Act for a smooth tax-paying experience.
Final Words
For more detailed information on Section 194JB and other TDS rules, refer to the official website of the Income Tax Department or consult a qualified financial advisor. It is always better to have a thorough understanding of your tax liabilities to avoid any confusion or penalties in the future.
