TDS
TDS on Technical Services & Royalty — Section 194J
Section 194J requires 2% TDS on technical services, royalty, or call-centre payments once they cross ₹50,000/year — lower than the professional-fee rate.
Section 194J covers both professional services and technical services, at different rates. Technical services typically means the provider applies technical knowledge or skill to perform a task on your behalf — AMC and technical support contracts, royalty for use of intellectual property, and certain call-centre services — as distinct from advisory work in a specified profession (legal, medical, accountancy), which is taxed at 10% instead of this section's 2%.
Importantly, the ₹50,000 threshold applies separately to each category of payment to the same payee — so a payee you pay ₹40,000 in technical-service fees and ₹40,000 in separate professional fees over the year wouldn't cross either threshold individually, even though the combined total exceeds ₹50,000.
From FY 2026-27, this is Section 393(1), Table 1, Sl. 6(iii)(a) under the Income-tax Act, 2025, filed against payment code 1026 — distinct from payment code 1027 used for the professional-fee rate under the same section.
Worked example
On a ₹55,000.00 payment at 2%, TDS is ₹1,100.00 and the net payment is ₹53,900.00. ₹55,000 for annual AMC/technical support from a vendor — since this exceeds ₹50,000 for the technical-services category, 2% TDS applies, tested separately from any professional-fee payments to the same payee.
Frequently asked questions
What counts as technical services versus professional services?
Technical services generally involve applying technical knowledge or skill on your behalf — AMC, technical support, and similar — while professional services cover advisory work in a specified profession like law, medicine, or accountancy. The distinction affects the rate: 2% for technical, 10% for professional, under the same section.
Are the professional and technical thresholds combined for the same payee?
No — each category (professional fees, technical fees, royalty, Section 28(va) payments) is tested against its own ₹50,000 threshold for that payee, not combined into one aggregate figure.
Is software licensing covered here as royalty?
Generally yes, if it's genuinely a royalty-type payment for the use of intellectual property — but the exact characterization can be fact-specific, so confirm against the nature of the licence before applying this rate.