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What is the advantage of Section 194J tax deduction scheme over Section 192?

Advantage of Section 194J tax deduction

 The Advantage of Section 194J Tax Deduction Scheme Over Section 192

The Advantage of section 194J tax deduction scheme over Section 192: Tax deduction at source (TDS) is an important aspect of the Indian tax system, aimed at ensuring timely collection of taxes. While both Section 194J and Section 192 are key sections of the Income Tax Act, they apply to different scenarios and taxpayers. We will explore what these sections are, how they differ, and what advantages Section 194J offers over Section 192.

1. Overview of Section 194J

Section 194J of the Income Tax Act applies to payments made towards professional services, technical services, royalty, and non-compete fees. Under this section, the person making the payment (the payer) is required to deduct TDS from the amount payable to the recipient. This section is primarily applicable to payments made to freelancers, consultants, lawyers, doctors, and other professionals.

2. Overview of Section 192

Section 192, on the other hand, governs the tax deduction on salary payments made by employers to their employees. Under this section, TDS is deducted from the employee’s salary at the time of payment, based on the income slab the employee falls into and the prevailing income tax rates.

3. Key Differences Between Section 194J and Section 192

Feature Section 194J Section 192
Applicable To Professionals, freelancers, technical services Salaried employees
TDS Rate Fixed at 10% (for professional services) Based on individual tax slabs
Threshold Limit ₹30,000 No threshold; applicable to all taxable salary
Income Type Professional services, technical services Salary income

4. Advantages of Section 194J Over Section 192

i. Fixed TDS Rate:

ii. Flexibility for Taxpayers:

iii. Threshold Limit Benefit:

iv. Simplified Compliance for Payees:

To visit: https://www.incometax.gov.in

 

FAQs

1.What is Section 194J?

Answer: Section 194J deals with tax deduction at source (TDS) on payments for professional or technical services, royalties, and fees for non-compete agreements.

2. What is Section 192?

Answer: Section 192 governs TDS on salary payments made by employers to their employees, deducted according to the employee’s income tax slab rate.

3. What is the main advantage of Section 194J over Section 192?

Answer: Section 194J offers a flat 10% TDS rate on professional services, whereas Section 192 applies a variable rate based on the employee’s total taxable salary, making Section 194J more predictable.

4. Is there a threshold limit for TDS in Section 194J?

Answer: Yes, TDS under Section 194J is applicable only if the payment exceeds ₹30,000 in a financial year, whereas Section 192 applies regardless of the salary amount.

5. Does Section 194J offer flexibility in tax deductions?

Answer: Yes, since it applies a fixed 10% rate, professionals have the flexibility to manage their overall tax liabilities, unlike employees under Section 192 who face automatic deduction based on their income bracket.

6. Is Section 194J applicable to salary payments?

Answer: No, Section 194J applies to fees for professional services, while Section 192 applies to salaries. This allows professionals more control over their tax deductions.

7. Does Section 194J offer lower compliance burdens?

Answer: Yes, Section 194J typically involves simpler compliance compared to Section 192, which requires employers to calculate TDS based on each employee’s tax slab and deductions.

8. Can Section 194J apply to independent consultants or freelancers?

Answer: Yes, Section 194J is particularly beneficial for freelancers and consultants as it standardizes TDS at 10%, avoiding the complexities of salary-based tax deductions under Section 192.

9. Does Section 194J help in cash flow management?

Answer: Yes, the lower flat rate of 10% under Section 194J helps professionals maintain better cash flow compared to employees, whose TDS may be higher based on salary brackets.

10. Are there any other deductions available under Section 194J?

Answer: While Section 194J sets a flat 10% TDS rate, professionals can still claim deductions under other sections (like 80C or 80D) when filing their annual tax returns, giving them control over tax planning.

 

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