Section 393 TDS on Professional and Technical Fees - Rates, Threshold, Due Dates, and Compliance Guide for Tax Year 2026-27
Quick Summary
- From 1 April 2026, fresh transactions are governed by the Income-tax Act, 2025.
- The current law for resident payments such as professional fees, technical fees, royalty, non salary director remuneration, and certain other covered sums is section 393(1), Table Sl. No. 6(iii).
- The TDS rate is 2% for fees for technical services, royalty for sale, distribution or exhibition of cinematographic films, and payees engaged only in the business of operating a call centre.
- The TDS rate is 10% for professional services, non salary remuneration, fees, or commission paid to directors, other royalty, and sums referred to in section 26(2)(h).
- The threshold is ₹50,000 for professional fees, technical fees, royalty, and section 26(2)(h) sums.
- There is no threshold for non salary remuneration, fees, or commission paid by a company to its directors.
- TDS must be deducted at the earlier of credit or payment.
- If PAN is not furnished, TDS is generally deducted at 20%, subject to the higher of rule.
- Where GST is shown separately on the invoice, businesses commonly compute TDS on the fee amount and not on the separately stated GST amount.
- The old Form 26Q is now Form No. 140.
- The old Form 16A is now Form No. 131.
- The quarterly statement due dates remain 31 July, 31 October, 31 January, and 31 May.
- The TDS certificate due dates remain 15 August, 15 November, 15 February, and 15 June.
- The general TDS deposit deadline remains the 7th of the following month, while tax deducted in March is generally deposited by 30 April.
- Interest for failure to deduct continues at 1% per month or part thereof.
- Interest for deduction but non deposit continues at 1.5% per month or part thereof.
- Late filing fee for TDS statements continues at ₹200 per day, subject to the prescribed limit.
- A lower or nil deduction certificate can be obtained under section 395(1).
- The biggest practical risks are wrong classification, missing TDS at the accrual stage, wrong form usage, and delayed deposit or filing.
What Is the Current Law After 1 April 2026?
From 1 April 2026, fresh TDS transactions are governed by the Income-tax Act, 2025. For this topic, the applicable provision for current transactions is section 393. The transition rule is based on the earlier of credit or payment. If the earlier of credit or payment happened on or before 31 March 2026, the old law applies . If the earlier of credit or payment happens on or after 1 April 2026, the new law applies. That means the same invoice can create different results depending on the timing of accrual and payment. The applicable law is decided by the earlier event. For current transactions in tax year 2026-27, the applicable framework is section 393.
Book A Demo
Where Section 194J Sits in the New Act
The practical mapping is as follows:
| Earlier Framework | Current Framework |
|---|---|
| Section 194J | Section 393(1), Table Sl. No. 6(iii) |
| Section 197 lower or nil certificate | Section 395(1) |
| Form 26Q | Form No. 140 |
| Form 16A | Form No. 131 |
| Quarterly TDS statement | Section 397(3)(b) |
| TDS certificate | Section 395(4)(a) |
The core compliance process remains familiar. Businesses still need to identify the nature of payment , apply the correct rate, check the threshold, deduct on time, deposit on time, file the quarterly statement, and issue the TDS certificate.
For transactions from 1 April 2026 onward, the applicable references are section 393, Form No. 140, and Form No. 131.
Current Rates Under Section 393
For resident payments covered under section 393(1), Table Sl. No. 6(iii), the rates are as follows:
| Nature of payment | TDS rate |
|---|---|
| Fees for technical services (not being professional services) | 2% |
| Royalty for sale, distribution or exhibition of cinematographic films | 2% |
| Payee engaged only in the business of operating a call centre | 2% |
| Fees for professional services | 10% |
| Non-salary remuneration, fees, or commission to a director | 10% |
| Other royalty | 10% |
| Any sum referred to in section 26(2)(h) | 10% |
The correct rate depends on the actual nature of the payment . It does not depend only on what the vendor calls itself. A software company can raise a technical invoice in one case and an advisory or consulting invoice in another. A professional firm may provide services that fall into different compliance buckets depending on the engagement structure.
Businesses should not reduce the classification test to shortcuts such as:
- All IT services are 2%
- All consulting is 10%
- All expert work is a professional service
- All service contracts fall under one section
Threshold Under the Current Law
The threshold structure under section 393(1), Table Sl. No. 6(iii) is as follows. The threshold is ₹50,000 for:
- professional fees
- technical fees
- royalty
- sums referred to in section 26(2)(h)
For non salary remuneration, fees, or commission paid to a director, the threshold is nil.
That means director related covered payments do not wait for any threshold crossing. TDS applies from the first covered payment itself.
Threshold Snapshot
| Payment type | Threshold |
|---|---|
| Professional fees | ₹50,000 |
| Technical fees | ₹50,000 |
| Royalty | ₹50,000 |
| Section 26(2)(h) sums | ₹50,000 |
| Non-salary director remuneration | Nil |
From a business process point of view, this means vendor ledgers must be monitored through the year. It is not enough to check one invoice in isolation. A payment that looks harmless on a standalone basis may cross the threshold when combined with earlier credits or payments to the same resident payee in the same relevant bucket.
This is where manual tracking often fails. Teams look only at the current invoice and forget the cumulative amount already credited or paid during the year.
Who Must Deduct TDS?
This area needs careful review under the current law because the new structure separates payer categories more clearly.
For most companies, LLPs, partnership firms , and similar organised entities making covered resident payments, section 393(1), Table Sl. No. 6(iii) is the relevant bucket to examine.
Individual and HUF cases need more careful classification because the new law also creates a separate bucket under section 393(1), Table Sl. No. 6(ii) for certain individuals or HUFs making payments for work, professional services, or commission or brokerage.
In practice, payer side analysis should answer five basic questions:
- Who is making the payment?
- Is the payee resident?
- What is the true nature of the payment?
- Which table entry applies?
- Has the relevant threshold been crossed?
Professional Services Covered Under Section 393
Fees for professional services continue to attract TDS at 10%. In practical business use, this usually covers services where the main value lies in professional skill, expert judgment, specialised advisory input, certification, or professional responsibility.
Examples commonly examined in this category include:
- legal retainership fees
- litigation appearance fees
- CA audit fees
- tax advisory fees
- accounting consultancy
- secretarial compliance services
- architectural consultancy
- engineering advisory
- design consultancy
- management consultancy
- expert certification work
- specialist medical or professional opinion services in a business context
The key test is whether the engagement is fundamentally professional. If the service is mainly based on specialised professional judgment, analysis, certification, or expert advice, the professional services bucket becomes more likely.
Practical signs that a payment is more likely to be for professional services
- The engagement letter focuses on advice, opinion, analysis, certification, compliance, representation, or review
- The output is a report, opinion, certificate, design recommendation, legal strategy, or professional deliverable
- The service depends heavily on the qualifications and expertise of the person or firm
- The value lies more in intellectual judgment than in routine execution
This distinction matters because many businesses lump all service invoices together. That leads to wrong rate selection and incorrect TDS mapping.
Technical Services Covered Under Section 393
Fees for technical services continue to attract TDS at 2%.
This category covers technical services that do not fall into the professional services bucket. The classification must be based on the actual engagement, not on assumptions.
Examples that may fall into this category include:
- technical support contracts
- software development assignments
- system implementation work
- application integration services
- technical maintenance arrangements
- technical configuration work
- data processing or technical processing services
- system migration support
- certain IT-enabled technical engagements
- call centre operations
However, businesses should not assume that every IT-related payment automatically qualifies as a technical service at 2%.
Some IT engagements are mixed. A single assignment may include:
- technical execution
- strategic advisory
- business consulting
- project governance
- solution design
- implementation support
If the contract is bundled and vague, the wrong rate can get applied. In high value or mixed service arrangements, the invoice description and scope document should clearly separate the components wherever commercially possible.
Signs that a payment is more likely to be technical services
- The work involves technical execution or technical support rather than broad advisory input
- The deliverable is technical in operation, implementation, maintenance, integration, or support
- The agreement describes system work, process execution, technical enablement, or service operation
- The commercial focus is on technical service delivery rather than professional certification or expert advisory judgment
Call Centre Operations
Call centre operations are separately recognised in the lower 2% bucket.
This is useful for businesses that outsource customer handling, support desk activity, response centres, or other call centre type operations through a covered service arrangement.
Where the payee is engaged only in the business of operating a call centre, the current rate is 2%.
Royalty Under the Current Law
Royalty continues to be split into two rate buckets.
| Royalty type | TDS rate |
|---|---|
| Royalty for sale, distribution or exhibition of cinematographic films | 2% |
| Other royalty covered in this bucket | 10% |
Royalty questions often become complicated because the commercial agreement may involve:
- a licence
- a right to use
- a limited commercial right
- intellectual property access
- a partial rights transfer
- exploitation rights
- distribution rights
Businesses need to review the agreement wording and understand which right is being granted and what consideration is being paid.
Sums Referred to in Section 26(2)(h)
Section 393(1), Table Sl. No. 6(iii) also covers sums referred to in section 26(2)(h), and these attract TDS at 10%, subject to the ₹50,000 threshold.
Where such sums arise, the purpose of the payment and the contractual basis should be reviewed carefully. These are not usually the most common day-to-day small business invoices, but when they appear, they should not be ignored or casually grouped with unrelated service payments.
Director Remuneration Under the Current Law
Non salary remuneration, fees, or commission paid by a company to a director continues to attract TDS at 10%. This includes items such as:
- sitting fees
- commission to non executive directors
- advisory fees paid to directors
- consulting fees paid to directors outside salary
- remuneration paid outside the salary structure
- board or committee attendance fees
This does not include regular salary to an executive or whole time director where the payment is in the nature of salary. Salary remains under the salary TDS framework .
The threshold here is nil. That means even a small covered payment triggers TDS.
Director Payment Snapshot
| Nature of payment | Typical treatment |
|---|---|
| Salary to executive or whole time director | Salary TDS provisions |
| Sitting fees | Section 393, 10% |
| Commission not forming part of salary | Section 393, 10% |
| Advisory or consultancy fee to director | Section 393, 10% |
Businesses should not wait for cumulative annual amounts in this category.
Director Remuneration Under the Current Law
Non salary remuneration, fees, or commission paid by a company to a director continues to attract TDS at 10%. This includes items such as:
- sitting fees
- commission to non executive directors
- advisory fees paid to directors
- consulting fees paid to directors outside salary
- remuneration paid outside the salary structure
- board or committee attendance fees
This does not include regular salary to an executive or whole time director where the payment is in the nature of salary. Salary remains under the salary TDS framework .
The threshold here is nil. That means even a small covered payment triggers TDS.
Director Payment Snapshot
| Nature of payment | Typical treatment |
|---|---|
| Salary to executive or whole time director | Salary TDS provisions |
| Sitting fees | Section 393, 10% |
| Commission not forming part of salary | Section 393, 10% |
| Advisory or consultancy fee to director | Section 393, 10% |
Businesses should not wait for cumulative annual amounts in this category.
When Must TDS Be Deducted?
The timing rule remains one of the most important compliance points.
TDS must be deducted at the earlier of:
- credit to the payee’s account
- actual payment
This means the accounting entry can trigger the TDS obligation even before money moves from the bank.
Situations where credit may trigger TDS
- year end fee provisions
- accrued consultancy expense
- professional fee payable entry
- technical service liability recognised in books
- credit to a payable or suspense account
- month end closing entries for unbilled but recognised services
This point is often missed by finance teams that only review TDS at the time of payment processing.
If the expense is recognised and the liability is credited first, the TDS check must happen there. Otherwise, the business may miss the deduction date and create interest exposure even if it later deducts and deposits the tax.
PAN Not Furnished
If the payee does not furnish PAN, the higher of rule applies. In most routine cases in this payment bucket, the practical result is a deduction at 20%.
Example
| Item | Amount |
|---|---|
| Professional fee | ₹80,000 |
| TDS rate where PAN not furnished | 20% |
| TDS amount | ₹16,000 |
| Net payment | ₹64,000 |
This creates a commercial problem because the vendor may object to the higher deduction, and the payer may face pressure to process payment without correct tax handling.
The simplest control is to ensure PAN is collected and validated before onboarding the vendor for payment.
GST and TDS Base
Where GST is shown separately on the invoice, businesses commonly compute TDS on the fee component and not on the separately stated GST amount .
Example
| Invoice item | Amount |
|---|---|
| Professional fee | ₹1,00,000 |
| GST @ 18% | ₹18,000 |
| Total invoice | ₹1,18,000 |
In such a case, TDS is generally computed on ₹1,00,000 and not on ₹1,18,000, provided GST is clearly shown separately on the invoice.
This means the invoice format matters. If GST is bundled or not clearly separated, the business should review the invoice carefully before finalising the TDS base.
Best practices for GST and TDS handling
- insist on a proper tax invoice
- ensure the base value and GST are shown separately
- do not rely on informal payment requests
- match the invoice to the agreement and purchase order, where relevant
- keep a consistent internal rule so that vendor wise treatment does not become random
Worked Examples
Professional fee above threshold
ABC Pvt Ltd pays a CA firm ₹60,000 as audit fees during tax year 2026-27.
| Item | Amount |
|---|---|
| Professional fee | ₹60,000 |
| Applicable rate | 10% |
| TDS amount | ₹6,000 |
| Net payment before GST adjustment | ₹54,000 |
This is a simple professional fee case. Since the amount is above the threshold and the nature of payment is professional service, TDS applies at 10%.
Technical service payment
XYZ Ltd pays ₹2,50,000 for a technical services engagement that clearly falls into the technical services bucket.
| Item | Amount |
|---|---|
| Technical fee | ₹2,50,000 |
| Applicable rate | 2% |
| TDS amount | ₹5,000 |
| Net payment before GST adjustment | ₹2,45,000 |
This example shows why classification matters. The difference between 2% and 10% can materially affect deduction amount, vendor cash flow, and downstream reconciliation.
Threshold crossed during the year
A business pays the same professional as follows:
| Month | Payment | Running total |
|---|---|---|
| April | ₹20,000 | ₹20,000 |
| August | ₹22,000 | ₹42,000 |
| November | ₹15,000 | ₹57,000 |
Once the running total crosses ₹50,000 in the relevant bucket, TDS becomes applicable according to the nature of payment.
This is the kind of situation where manual spreadsheets fail if the team does not maintain cumulative vendor tracking.
Director sitting fees
A company pays an independent director ₹8,000 per meeting.
| Meeting fee | ₹8,000 | Net payment |
|---|---|---|
| TDS @ 10% | ₹800 | ₹7,200 |
Since there is no threshold for non salary director remuneration, TDS applies from the first payment.
No PAN case
A consultant is paid ₹80,000 and does not furnish PAN.
| Item | Amount |
|---|---|
| Fee | ₹80,000 |
| TDS rate | 20% |
| TDS amount | ₹16,000 |
| Net payment | ₹64,000 |
This example shows how non availability of PAN can sharply increase the deduction amount.
GST separately stated case
A consultant raises the following invoice:
| Item | Amount |
|---|---|
| Service fee | ₹1,50,000 |
| GST @ 18% | |
| ₹27,000 | |
| Total invoice | ₹1,77,000 |
If the business follows the usual GST separated approach, TDS is computed on ₹1,50,000 and not on ₹1,77,000.
At 10%, TDS would be ₹15,000.
Deposit Deadlines
The practical deposit schedule remains familiar.
For non government deductors:
- TDS deducted in April to February is generally deposited by the 7th of the following month
- TDS deducted in March is generally deposited by 30 April
Deposit Calendar for Tax Year 2026-27
| Deduction month | Deposit deadline |
|---|---|
| April 2026 | 7 May 2026 |
| May 2026 | 7 June 2026 |
| June 2026 | 7 July 2026 |
| July 2026 | 7 August 2026 |
| August 2026 | 7 September 2026 |
| September 2026 | 7 October 2026 |
| October 2026 | 7 November 2026 |
| November 2026 | 7 December 2026 |
| December 2026 | 7 January 2027 |
| January 2027 | 7 February 2027 |
| February 2027 | 7 March 2027 |
| March 2026 | 30 April 2027 |
Businesses should not wait for the quarterly return due date to think about tax payment. Deposit delay creates independent interest exposure even if the quarterly statement is later filed correctly.
Quarterly TDS Statement Under Current Law
The old Form 26Q has been replaced by Form No. 140.
This is the quarterly TDS statement for resident non salary payments covered under the current law.
Due Dates for Form No. 140
| Quarter | Period | Due date |
|---|---|---|
| Q1 | April to June 2026 | 31 July 2026 |
| Q2 | July to September 2026 | 31 October 2026 |
| Q3 | October to December 2026 | 31 January 2027 |
| Q4 | January to March 2027 | 31 May 2027 |
A correctly prepared quarterly statement should capture:
- deductor details
- deductee PAN
- nature of payment
- applicable section details
- amount paid or credited
- tax deducted
- date of deduction
- challan details
- correct mapping to the relevant bucket
Mistakes in the statement can create several problems at once:
- mismatch in the tax credit for the payee
- notices or correction statements
- confusion during vendor reconciliation
- additional internal effort for revisions
- reputational issues with vendors and professionals
TDS Certificate Under Current Law
The old Form 16A has been replaced by Form No. 131. This is the TDS certificate for covered non-salary payments under the current framework.
Due Dates for Form No. 131
| Quarter | Issue deadline |
|---|---|
| Q1 | 15 August 2026 |
| Q2 | 15 November 2026 |
| Q3 | 15 February 2027 |
| Q4 | 15 June 2027 |
Businesses should issue the certificate within 15 days from the due date of the quarterly statement.
The certificate is not just a formality. Payees rely on it for visibility into tax credits and year-end reconciliation. Delays here often damage vendor relationships because the payee may see a deduction in payment working, but not get the certificate on time.
Lower or Nil Deduction Certificate
The current law equivalent of the old section 197 route is section 395(1). A payee who expects that normal TDS will be higher than the final tax liability can apply for a lower or nil deduction certificate. This is especially useful for:
- consultants with multiple clients
- professionals with low final tax liability compared to gross receipts
- service providers facing excess TDS and refund dependence
- cases where regular deduction affects working capital badly
Once the certificate is issued, the deductor should apply the rate mentioned in that certificate.
For payer-side compliance, the important point is simple: do not guess a lower rate on your own. Apply lower or nil deduction only where valid supporting documentation exists.
Consequences of Non Compliance
The basic consequence framework remains serious.
Interest
| Default | Interest |
|---|---|
| Failure to deduct TDS | 1% per month or part thereof |
| TDS deducted but not deposited | 1.5% per month or part thereof |
Other Consequences
| Default | Likely consequence |
|---|---|
| Late filing of quarterly TDS statement | ₹200 per day, subject to prescribed limit |
| Failure to issue TDS certificate on time | Applicable penalty exposure |
| Failure to deduct or deposit | Penalty may apply |
| Expense booked without proper TDS compliance | Disallowance consequences may apply |
The actual financial hit can become much larger than the original TDS amount because several consequences can operate together:
- interest for timing default
- late fee for statement delay
- penalty exposure
- tax credit mismatch disputes
- extra compliance effort
- expense disallowance consequences in business taxation
Common Mistakes Businesses Make
The most common mistakes in this area are predictable.
Wrong classification
The business treats all service invoices the same and applies one flat rule without reading the contract or service description.
Ignoring the credit trigger
The team deducts tax only at bank payment stage and ignores year end accruals or fee payable entries.
Threshold not tracked cumulatively
Each invoice is checked separately, but the yearly cumulative amount to the same vendor is not monitored properly.
PAN not collected on time
The business processes the payment first and tries to resolve PAN later, which creates higher deduction issues and vendor disputes.
Old forms are still being used in internal communication
Finance teams or content pages still refer to Form 26Q and Form 16A even though the current framework now uses Form No. 140 and Form No. 131.
Weak invoice documentation
The invoice does not clearly separate service fee and GST, or does not clearly describe the actual nature of service.
Section 393 vs Contractor and Commission Payments
Misclassification remains one of the biggest risks in TDS compliance.
A simple working distinction is:
- where the payment is mainly for specialised professional or technical expertise, the section 393 professional or technical fee rules may apply
- where the payment is mainly for contract execution or work output, contractor payment provisions may need to be examined
- where the payment is for commission, facilitation, or brokerage, the commission or brokerage bucket should be examined
This is only a working direction. The actual classification must still be based on:
- the contract
- the invoice
- the scope of work
- the commercial substance
- the nature of the deliverable
Best Practices for Businesses
A strong section 393 compliance process usually includes the following controls:
- vendor onboarding with PAN collection
- service classification review before first payment
- cumulative threshold tracking vendor wise
- accrual stage TDS checks during month end and year end closing
- standard invoice review for GST separation
- timely challan payment
- quarterly statement preparation before deadline pressure starts
- timely certificate issuance
- proper documentation of lower or nil deduction certificates
- internal review for mixed or high value contracts
Businesses that automate these checks usually avoid most common errors. Businesses that handle them manually often miss the same issues again and again.
Explore All BUSY Calculators for Easy GST Compliance
Conclusion
From 1 April 2026, the applicable framework is section 393 of the Income-tax Act, 2025, along with the updated statement and certificate forms.
The practical compliance logic remains familiar, but businesses must update their references and processes.
They need to:
- identify the true nature of payment
- apply the correct 2% or 10% rate
- monitor the ₹50,000 threshold where relevant
- remember that director remuneration has no threshold
- deduct at the earlier of credit or payment
- deposit TDS on time
- file Form No. 140 correctly
- issue Form No. 131 within time
- maintain proper vendor and invoice documentation
The biggest real world mistakes are still the same: wrong classification, missed accrual stage deduction, delayed deposit, wrong statement filing, and weak documentation. A business that gets these basics right will avoid most Section 393 TDS problems.
