TDS
TDS on Technical Services & Royalty — Section 194J
Section 194J requires 2% TDS on payments for technical services, royalty, or call-centre services once they cross ₹50,000 a year to that payee — the same section as professional fees, taxed lower for this category.
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.