TDS on Professionals w.e.f 01.4.2026 as per New Income Tax Rules 2026
Under the Income-tax Act, 2025, effective from April 1, 2026, the provisions for Tax Deducted at Source (TDS) on payments to professionals and technical service providers have been consolidated under Section 393(1). This replaces the erstwhile Sections 194J and 194M of the old Act. [ Refer Section 393 Income Tax Act 2025 Tax to be deducted at source.]
Here are the complete provisions for deducting TDS on professional and technical services:
1. General TDS on Professional and Technical Services
When a “specified person” makes a payment to a resident by way of fees for professional services, fees for technical services, or remuneration/commission to a director (other than salary), tax must be deducted under Section 393(1) [Table: Sl. No. 6(iii)].
- Applicable Rates:
- 2% for fees for technical services (provided they are not professional services).
- 2% if the payee is engaged exclusively in the business of operation of call centers.
- 10% for fees for professional services and other cases (including remuneration to directors).
- Threshold Limits:
- TDS is required to be deducted if the sum or aggregate of sums credited or paid during the tax year exceeds ₹50,000 for professional or technical services.
- For remuneration, fees, or commission paid to a company director, there is no threshold limit (TDS applies from the first rupee).
2. TDS by Individuals/HUFs Not Covered Above (The ₹50 Lakh Rule)
If an Individual or Hindu Undivided Family (HUF) is not required to deduct tax under the general provision above (typically because their business turnover does not subject them to tax audit requirements), they are still liable to deduct TDS if they make substantial payments to professionals under Section 393(1) [Table: Sl. No. 6(ii)].
- Applicable Rate: 2%.
- Threshold Limit: TDS is required if the aggregate of such fees for professional services paid or credited to a resident exceeds ₹50,00,000 in a tax year.
- Compliance (Form 141): These deductors are not required to obtain a TAN. They must report and deposit the deducted tax using Schedule C of the new Challan-cum-Statement Form No. 141. The form must be filed and tax paid electronically within 30 days from the end of the month in which the deduction was made.
3. Definitions
- Professional Services: This means services rendered in the course of carrying on legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising, or any other profession notified by the Board.
- Fees for Technical Services: This refers to any consideration for rendering managerial, technical, or consultancy services (including the provision of technical or other personnel). It does not include payments for construction, assembly, mining, or any payment that would be chargeable under the head “Salaries” for the recipient.
4. Exemption for Personal Purposes
No TDS is required to be deducted on fees for professional or technical services if the sum is credited or paid by an Individual or HUF exclusively for the personal purposes of such individual or any member of the HUF.
5. Transition Rules (March-April 2026)
The governing Act depends on the earlier of the event of credit or payment.
- If the professional fees are credited or paid on or before March 31, 2026, the TDS obligation falls under Section 194J (or 194M) of the old Income-tax Act, 1961.
- If the earlier event of credit or payment occurs on or after April 1, 2026, the deductor must apply the new Act and quote the correct new section references (e.g., Section 393(1) [Table: Sl. No. 6(iii)]) in their TDS returns to avoid system-level validation errors.
6 .How to calculate tds on professional fees Rs 100000
how to calculate tds on professional fees Rs 100000 during the tax year 2026-27
Under the new Income-tax Act, 2025 (applicable for payments made on or after April 1, 2026), the calculation of Tax Deducted at Source (TDS) on professional fees depends on the type of payer.
Here is how to calculate the TDS on a professional fee of ₹1,00,000:
Scenario 1: The Payer is a “Specified Person” (e.g., Company, Firm, or Audited Individual/HUF)
For standard businesses and entities, TDS on professional fees is governed by Section 393(1) [Table: Sl. No. 6(iii)].
- Threshold Check: TDS must be deducted if the aggregate payment during the tax year exceeds ₹50,000. Since ₹1,00,000 is greater than ₹50,000, TDS is applicable on the entire amount.
- Determine the Rate: The standard TDS rate for professional services is 10%. (Note: If the payee is engaged exclusively in operating a call centre, the rate is reduced to 2%).
- Calculation:
- Total Professional Fee: ₹1,00,000
- TDS Amount (10% of ₹1,00,000): ₹10,000
- Net Payment to Professional: ₹1,00,000 – ₹10,000 = ₹90,000.
Scenario 2: The Payer is an Individual or HUF (Not liable for tax audit)
If the payer is an Individual or HUF who is not required to deduct tax under the general provision above, they are governed by a different rule under Section 393(1) [Table: Sl. No. 6(ii)].
- Threshold Check: Such individuals/HUFs are only required to deduct TDS (at a rate of 2%) if the aggregate payments to the professional exceed ₹50,00,000 in a tax year.
- Calculation: Because your payment is only ₹1,00,000 (which is well below the ₹50 lakh threshold), no TDS is required to be deducted. You will pay the full ₹1,00,000 to the professional.
Exemption for Personal Use:
Regardless of the amount, if the ₹1,00,000 is paid by an Individual or HUF exclusively for personal purposes, no TDS is required to be deducted.
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