TDS on Professional Fees in 2026: 10% or 2%, the Threshold and Director Fees

Every business that uses a chartered accountant, a lawyer, an architect or a consultant runs into TDS on professional fees, and every freelancer and consultant sees it on the other side — as a 10% gap between the invoice and the money that arrives. The rules look simple until you meet the edge cases: is a calibration lab a professional or a technical service, does a director's sitting fee need a threshold, and what changed when the Income-tax Act, 2025 replaced section 194J. This guide is for MSME owners, finance teams and the professionals who receive these payments. It covers the 10% and 2% rates, the ₹50,000 limit, directors, royalty, personal payments, PAN and lower-deduction certificates, with worked examples in rupees.

Quick answer

TDS on professional fees is 10% and on technical services (plus film royalty and call-centre payments) 2%, once the year's payments to that person exceed ₹50,000. Directors' fees and commission are taxed at 10% from the first rupee. Since 1 April 2026 the rule is section 393(1) Table Sl. No. 6(iii) of the Income-tax Act, 2025 (old section 194J), with rates and limits unchanged.

• Professional services (CA, lawyer, doctor, architect, engineer, consultant, interior decorator, advertising): 10%

• Technical services, film royalty, call centres: 2%

• Threshold ₹50,000 a year per payee; directors' fees: Nil (TDS from the first rupee)

• Who deducts: companies, firms, LLPs and individuals/HUFs above ₹1 crore business or ₹50 lakh professional turnover last year

• No PAN: 20%; GST shown separately is excluded

Which payments are covered

Section 393(1) Table Sl. No. 6(iii) covers five kinds of payment to a resident: fees for professional services, fees for technical services, remuneration or fees or commission paid to a company director (other than amounts taxed as salary), royalty, and sums received for not carrying out a business or profession — non-compete fees. All five were in section 194J of the 1961 Act, and all five now sit in one row of the new TDS table with two rates.

Professional services has a fixed meaning. Section 402(28) defines it as services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession, or the profession of accountancy, technical consultancy, interior decoration or advertising, or any other profession that the CBDT notifies for this purpose. A chartered accountant's audit fee, an advocate's fee for a notice or a hearing, a doctor's retainer at a factory, an architect's design fee, an engineering consultant's structural report, and an advertising agency's creative fee are all professional services.

Fees for technical services borrow the definition in section 9(7)(b): consideration for rendering managerial, technical or consultancy services, including making technical or other personnel available. Two things are carved out — consideration for a construction, assembly, mining or like project undertaken by the recipient, and amounts taxable as salary. Testing and calibration, technical support for plant and machinery, quality inspections and managerial support services are typical technical services.

Royalty means payments for the use of patents, know-how, trademarks, copyright, software licences and similar rights. Royalty for the sale, distribution or exhibition of cinematographic films attracts 2%; other royalty attracts 10%.

What is not covered matters as much. Work done to your order — civil, electrical, printing, catering, transport, job work — is contract work, taxed at 1% or 2% under a different row; see our TDS on contractor payments guide. And from 1 April 2026, supply of manpower is contract work too. The Finance Bill 2026 memorandum noted the ambiguity over whether staffing contracts belonged under the professional/technical row (because technical services include "provision of services of technical or other personnel") or the contractor row, and the Finance Act 2026 settled it by adding manpower supply to "work".

Professional-fee TDS at a glance (2026-27)

10%

Professional fees

also directors, most royalty

2%

Technical services

also film royalty, call centres

₹50,000

Yearly limit per payee

was ₹30,000 before April 2025

Nil

Limit for directors' fees

TDS from the first rupee

Who has to deduct

The professional-fee row applies when the payer is a specified person: anyone other than an individual or HUF — companies, firms, LLPs, trusts, societies, co-operatives, government bodies — and an individual or HUF whose total sales, gross receipts or turnover exceeded ₹1 crore from business or ₹50 lakh from a profession in the tax year immediately before the year of payment.

There is an exemption that matters to proprietors and professionals who cross those lines: fees paid by an individual or HUF exclusively for personal purposes are outside TDS (section 393(4) Table Sl. No. 9). A trader with ₹3 crore turnover who pays a doctor for a family member's treatment, or a lawyer for a family property matter, deducts nothing. The same trader paying a CA for the business's audit does deduct.

Individuals and HUFs who are not specified persons are outside this row altogether, but a separate rule — Table Sl. No. 6(ii), which replaced section 194M — catches large payments. If they pay one professional, contractor or commission agent more than ₹50 lakh in a year, they deduct 2%, using their PAN and Form 141 Schedule C, without a TAN.

Rates, thresholds and payment codes

The ₹50,000 limit was raised from ₹30,000 by the Finance Act 2025 with effect from 1 April 2025, and the Income Tax Department's e-filing help confirms it carried over into section 393 unchanged. The 1961 Act applied the limit separately to each type of fee — professional fees, technical fees, royalty and non-compete fees — and the 2025 Act lists the limit against each of those items in the same way; most deductors continue to test each category separately for each payee.

When the year's total to a payee crosses the limit, TDS applies to the entire amount for the year, not just the excess. Deduct on the bill that crosses the limit and catch up on the earlier bills. Timing is the earlier of credit in your books or payment, so fees booked on 31 March are deductible in March even if paid in May.

10% or 2%: telling professional and technical services apart

The 8-percentage-point gap makes classification the most disputed part of this provision. A useful order of questions:

1. Is the service performed in one of the named professions? Legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, advertising, or a CBDT-notified profession. If yes, it is a professional service at 10%, even if it is technical in nature. An engineering firm's design report is professional; so is a technical consultant's advice on a new production line.
2. If not, is it managerial, technical or consultancy service? Then it is a technical service at 2%. Machine calibration by a testing lab, technical support for a CNC installation, or an outsourced quality inspection fall here.
3. Is it really work done to order? Printing, fabrication, repairs, AMCs where the vendor's staff simply carry out maintenance, and staffing are contract work at 1% or 2%.
4. Is it a purchase? Buying a software licence off the shelf, or buying goods, is not a fee for services. Software licence payments may still be royalty, so check the agreement.

Write contracts and invoices to describe what is actually supplied. A vendor's invoice that says "consultancy charges" for what is a maintenance visit invites the 10% rate; an invoice that says "AMC — preventive maintenance as per schedule" supports contract treatment. Where you are unsure and the amounts are large, the conservative course is the higher rate, because under-deduction carries interest and disallowance while over-deduction is recovered by the payee in their return.

Common MSME payments — which rate?

Payment	Usual treatment	Rate
Statutory audit, GST and ITR fees to a CA firm	Professional services	10%
Advocate's fee for a recovery suit	Professional services	10%
Architect's design and supervision fee	Professional services	10%
Calibration and testing of instruments by a lab	Technical services	2%
Outsourced call-centre for customer support	Call centre	2%
Security or housekeeping staff from an agency	Contract work (manpower) from 1 April 2026	1% / 2%
Independent director's sitting fees	Director remuneration	10%, no limit

Statutory audit, GST and ITR fees to a CA firm

Usual treatment

Professional services

Rate

10%

Advocate's fee for a recovery suit

Usual treatment

Professional services

Rate

10%

Architect's design and supervision fee

Usual treatment

Professional services

Rate

10%

Calibration and testing of instruments by a lab

Usual treatment

Technical services

Rate

2%

Outsourced call-centre for customer support

Usual treatment

Call centre

Rate

2%

Security or housekeeping staff from an agency

Usual treatment

Contract work (manpower) from 1 April 2026

Rate

1% / 2%

Independent director's sitting fees

Usual treatment

Director remuneration

Rate

10%, no limit

Directors' fees and commission

Payments by a company to its directors that are not salary — sitting fees, commission on profits, professional fees billed by a director — are covered by Table Sl. No. 6(iii) at 10% with a nil threshold. Deduct on the first sitting fee of the year, however small. Payments to a whole-time or managing director who is an employee are salary and suffer TDS under section 392 instead, at slab rates through payroll.

The usual mistakes here are applying the ₹50,000 limit to independent directors' sitting fees, and missing the commission that is approved at the board meeting adopting the accounts but credited to the director's account in March. Commission credited in the books is deductible at the time of credit, even if it is paid after the annual general meeting.

Payments to partners by their firm — salary, remuneration, commission, bonus and interest — are a different provision with its own 10% rate and ₹20,000 limit (the old section 194T), and are not professional fees.

Worked examples in ₹

1. CA firm's fees crossing the limit. A private limited company pays its CA firm ₹15,000 a quarter for GST returns and ₹30,000 in September for the tax audit. After the first two quarters the total is ₹30,000 — below ₹50,000. The September audit fee takes the total to ₹60,000, so TDS at 10% is due on the whole ₹60,000: ₹6,000, deducted from the audit fee bill. The December quarter's ₹15,000 then suffers ₹1,500. GST at 18% shown separately is ignored throughout.

2. Technical service. A food processor pays an accredited lab ₹80,000 during the year for calibration of weighing scales and temperature probes. This is a technical service, not a professional one, so TDS is 2%: ₹1,600.

3. Independent director. A company pays an independent director ₹20,000 sitting fee for each of four board meetings and ₹1,00,000 commission credited in March. TDS is 10% from the first meeting: ₹2,000 per meeting and ₹10,000 on the commission — ₹18,000 for the year.

4. Consultant without PAN. A firm engages a freelance marketing consultant for ₹90,000. The consultant does not give a PAN, so the rate becomes 20%: ₹18,000 instead of ₹9,000. Once the consultant provides a valid PAN, later deductions return to 10%.

5. Proprietor below the turnover line. A boutique owner with ₹70 lakh turnover last year pays an interior designer ₹3 lakh to redo the shop. She is not a specified person, so no TDS under Sl. No. 6(iii); the payment is also below ₹50 lakh, so Sl. No. 6(ii) does not apply either. Had last year's turnover been ₹1.2 crore, she would deduct ₹30,000.

6. Small-scale software royalty. A trading company pays ₹1,20,000 a year to an Indian developer for a licence to use its billing software under a licence agreement. That is royalty other than film royalty: 10%, ₹12,000.

Try it — TDS on a professional fee

Payment AmountNature of Payment (Section)

194C — Contractor (Individual/HUF) · 1%194C — Contractor (Others) · 2%194J — Professional fees · 10%194J — Technical services · 2%194H — Commission / brokerage · 2%194I — Rent (Land & building) · 10%194I — Rent (Plant & machinery) · 2%194Q — Purchase of goods · 0.1%194A — Interest (other than securities) · 10%

Payee PAN

PAN availableNo PAN (20%)

Payment Amount₹60,000.00

Section194J

TDS Rate10%

TDS to Deduct₹6,000.00

Net Payable to Payee₹54,000.00

Open the full TDS Calculator (PDF, save, compare)

If you are the professional receiving the fee

A consultant billing ₹15 lakh a year to companies will see ₹1.5 lakh deducted, and that money is theirs — it is credit for their own income tax. Check the Annual Information Statement every quarter to make sure each client's deduction has been reported against your PAN; a client who quoted the wrong PAN or did not file Form 140 has to fix it with a correction statement on TRACES. Ask clients for the quarterly Form 131 certificate (formerly Form 16A).

Many small professionals over-suffer TDS. A professional opting for presumptive taxation, whose receipts are within ₹75 lakh (if cash receipts ≤ 5%), else ₹50 lakh, is taxed on 50% of receipts, and after the new-regime rebate on income up to ₹12 lakh may owe little or nothing. Such a professional can apply on TRACES in Form 128 for a lower or nil deduction certificate under section 395(1), giving the estimated income and tax for the year. The Assessing Officer issues a certificate naming the rate, period and the deductors (or amount) it covers, and clients must deduct at that rate. The Finance Act 2026 also enabled an electronic, condition-based route for small taxpayers; the rules for it had not been notified as of the government's August 2026 update, so Form 128 remains the way to apply.

Professionals whose TDS does not cover their full tax still owe advance tax — and those on presumptive taxation pay it in one instalment by 15 March. Starting out on your own? Our guide on how to start a consulting business covers registration and invoicing.

Deposit, statements, interest and disallowance

Business deductors deposit TDS by the 7th of the next month (30 April for March deductions) under their TAN, quoting section 393(1) Table Sl. No. 6(iii) and payment code 1026, 1027 or 1028. They report the deduction in quarterly Form 140 (which replaced Form 26Q), due 31 July, 31 October, 31 January and 31 May, and issue Form 131 from TRACES to the payee each quarter.

Failure to deduct costs interest at 1% a month or part of a month; late deposit costs 1.5% a month or part of a month. A late statement attracts ₹200 a day, capped at the TDS amount. And if TDS on a payment to a resident is not deducted, or not paid by the return due date, 30% of the expense is disallowed in computing your taxable profit under section 35(b) of the new Act (old section 40(a)(ia)). On ₹5 lakh of consultancy fees without TDS, ₹1.5 lakh is added back to profit until the TDS is paid.

Getting professional-fee TDS right each month

1. 1

   Classify the payee and the service

   Professional (10%), technical (2%), director (10%, no limit) or contract work (1%/2%). Record PAN and entity type in the vendor master.

2. 2

   Track the year's total per payee

   Deduct once the total crosses ₹50,000, with catch-up on earlier bills. Directors: from the first rupee.

3. 3

   Exclude GST shown separately

   Under Circular 23/2017, compute TDS on the fee before GST.

4. 4

   Deposit by the 7th

   Use e-Pay Tax with your TAN and the right payment code; March deductions by 30 April.

   e-Filing portal
5. 5

   File Form 140 and issue Form 131

   Quarterly statement and certificate from TRACES within 15 days of the statement due date.

Common mistakes

Still using ₹30,000. The limit has been ₹50,000 since 1 April 2025. Old software settings over-deduct on small consultants and create needless refund claims.

Applying the limit to directors. Directors' fees have no threshold. Missing the deduction on sitting fees is a frequent finding in tax audits.

Deducting 10% on manpower. From 1 April 2026 staffing and security agencies fall under contractor TDS at 1% or 2%.

Deducting on GST. If GST is shown separately, leave it out. If you have already deducted on it, adjust later deductions for the same payee within the year.

Deducting on personal payments. A proprietor's family doctor or personal lawyer is outside TDS even if the proprietor is a specified person for business payments.

What changed under the Income-tax Act, 2025

From 1 April 2026, section 194J became section 393(1) Table Sl. No. 6(iii) and section 194M became Sl. No. 6(ii). The 10% and 2% rates, the ₹50,000 limit and the nil limit for directors are unchanged. What changed is the reference you quote, the payment codes, the forms (Form 140 and Form 131 instead of Forms 26Q and 16A; Form 128 instead of Form 13), and — through the Finance Act 2026 — the move of manpower supply to contractor TDS. If the earlier of credit or payment happened on or before 31 March 2026, the old Act still governs that payment.

Official links

• Income-tax Act, 2025 — Gazette texts.393(1) Table Sl. 6(iii); s.402(28); s.9(7)(b)
• TDS compliance helpSection mapping, transition, interest
• Finance Bill 2026 — MemorandumManpower supply; electronic lower-deduction applications
• TRACESForm 131 certificates, Form 128, corrections
• e-Filing portalPay TDS; AIS for payees

What to do next

Review your vendor list once: mark each professional, technical-service provider, director and agency with the right rate, and check that the ₹50,000 limit is set correctly. Then use our free TDS calculator for any bill you are unsure of, and see our guides to TDS on contractor payments and TDS on rent. For the full TDS cycle, start with what is TDS.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the TDS rate on professional fees in 2026?

Fees for professional services — paid to a chartered accountant, lawyer, doctor, architect, engineer, consultant, interior decorator or advertising professional — attract 10% TDS. Fees for technical services that are not professional services, royalty for films and payments to call centres attract 2%. The provision is section 393(1) Table Sl. No. 6(iii) of the Income-tax Act, 2025, which replaced section 194J from 1 April 2026.

What is the TDS limit on professional fees?

No TDS is needed until the fees paid or credited to one person in the tax year exceed ₹50,000. Once that total is crossed, TDS applies to the whole year's amount, not just the excess. The limit rose from ₹30,000 to ₹50,000 from 1 April 2025 and was carried into the new Act unchanged. Directors' fees have no limit at all.

Is TDS deducted on director sitting fees?

Yes, at 10% from the first rupee. Remuneration, fees or commission paid by a company to a director, other than amounts taxed as salary, fall under section 393(1) Table Sl. No. 6(iii) with a nil threshold. A whole-time director on the payroll suffers salary TDS under section 392 instead.

What is the difference between professional and technical services for TDS?

Professional services are services rendered in legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration or advertising professions, or other notified professions — 10%. Technical services mean managerial, technical or consultancy services that are not professional services — such as testing, calibration or plant maintenance support — 2%. If a service fits the professional definition, the 10% rate applies.

Is TDS on professional fees deducted on the GST amount?

No, if the GST is shown separately on the invoice. Under CBDT Circular 23/2017, TDS is deducted on the fee excluding the GST component when the two are indicated separately. If the invoice shows a single figure, deduct on the whole amount, so ask your CA or consultant for an invoice with GST on its own line.

Do individuals have to deduct TDS on their doctor's or lawyer's fees?

Generally no. Fees paid by an individual or HUF exclusively for personal purposes are exempt. Individuals and HUFs with business turnover above ₹1 crore or professional receipts above ₹50 lakh in the previous year must deduct on business-related fees, and other individuals deduct 2% only if fees to one professional exceed ₹50 lakh in the year.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.The Income-tax Act, 2025 (Act No. 30 of 2025), Gazette of India Extraordinary, 21 August 2025 — Ministry of Law and Justice (Legislative Department) · accessed 9 October 2026
2. 2.TDS Compliance — e-Filing help — Income Tax Department (e-Filing portal) · accessed 9 October 2026
3. 3.Memorandum explaining the provisions in the Finance Bill, 2026 — Ministry of Finance (Union Budget) · accessed 9 October 2026
4. 4.TDS / TCS Rate Chart Tax Year (FY 2026-27) — TDSMAN · accessed 9 October 2026
5. 5.TDS on Fees for Professional and Technical Services — Section 393(1) (194J) — TDSMAN · accessed 9 October 2026
6. 6.CBDT Circular No. 23/2017 — TDS on GST component — TaxGuru (reproducing CBDT circular dated 19 July 2017) · accessed 9 October 2026
7. 7.Form 13 is now Form 128: lower or nil TDS certificate guide — Busy Infotech · accessed 9 October 2026