10% TDS under Section 194J of the Income-tax Act, 1961 applies to sitting fees and commission paid to non-executive directors for attending board or committee meetings. Executive and managing director remuneration that is chargeable as salary goes through Section 192 instead. The ₹50,000 aggregate threshold under 194J — raised from ₹30,000 by the Finance Act, 2025 from 1 April 2025 — applies to professional and technical fees; remuneration or fees to a director are generally treated as outside the threshold, so TDS is deducted from the first rupee.
Changed FY 2025-26: the general 194J professional-fee threshold was raised from ₹30,000 to ₹50,000 by the Finance Act 2025. Director payments under 194J are generally treated as outside the threshold, so 10% TDS runs from the first rupee.
What the law actually requires
Section 194J covers three kinds of payment to a resident: (a) fees for professional services, (b) fees for technical services, and (c) any remuneration, fees or commission — by whatever name called — to a director of a company, other than sums on which tax is deductible under Section 192 (salary). Sitting fees fall under (c): they are remuneration to a director, authorised by Section 197(5) of the Companies Act 2013 and fixed by board resolution.
The threshold question
The proviso to Section 194J exempts deduction on professional and technical fees until the aggregate to a payee exceeds ₹50,000 in a financial year (raised from ₹30,000 by the Finance Act, 2025, effective 1 April 2025). The proviso is worded around "fees for professional services or fees for technical services."
Sitting fees and commission to a director are remuneration to a director under 194J(c), not fees for professional services under 194J(a). The conservative and commonly followed reading is that no threshold applies — the company deducts 10% from the first rupee of sitting fees.
⚠️ — practice on the sitting-fee threshold varies. Some practitioners apply the professional-fees threshold (₹30,000 before FY 2025-26, ₹50,000 from FY 2025-26) to sitting fees; the prevailing position for director payments is that no threshold applies. Confirm the treatment your firm follows before the first deduction, and note that deducting on the full amount is the safer of the two if a short-deduction is later alleged.
Executive directors are a different route
Where a director is in employment with the company — an executive, managing or whole-time director drawing salary — the payment is chargeable under the head "Salaries" and TDS is deducted under Section 192 at slab rates, based on the annualised salary, with no per-payment threshold. The same director can receive sitting fees for board meetings in addition to salary; those sitting fees attract 194J, not 192, because they are not salary.
Companies Act overlay
Director remuneration — sitting fees, commission and salary — must be within the limits of Section 197 of the Companies Act 2013 and be disclosed in the Board's report. The TDS treatment does not change the Companies Act approval requirement: sitting fees need a board resolution, and remuneration to executive directors needs the approvals in Section 197 and Schedule V where the limits are crossed.
Worked example: ABC Pvt Ltd
ABC Pvt Ltd has three independent directors (non-executive). It pays ₹5,000 per meeting per director, and each director attends 12 meetings in FY 2025-26.
Under the no-threshold position, ABC deducts 10% from the first meeting's ₹5,000 fee (₹500 per meeting). Even under the professional-fees-threshold reading, each director crosses ₹50,000 in the year, so TDS is due on the full ₹60,000 regardless. The company deposits ₹1,500 per meeting (₹500 × 3 directors), and ₹18,000 across the year, and reports all three directors in Form 26Q.
A ₹5,000-per-meeting fee is comfortably within the Companies Act unlisted-company flexibility (the ₹1,00,000 per-meeting cap in Rule 4 of the Appointment and Remuneration of Managerial Personnel Rules applies to listed companies), so the board resolution is the only approval needed.
Practical implications
- Deduct from the first rupee to be safe. If the department ever disputes the threshold, deducting on the full amount leaves nothing short-deducted; relying on a threshold that the officer does not accept creates interest under Section 201(1A) and a 30% disallowance risk under Section 40(a)(ia).
- Keep the salary/sitting-fee boundary clean. Paying an executive director's salary as "sitting fees" mislabels salary as 194J income and invites scrutiny of the employment relationship. Pay salary through payroll (192) and sitting fees through the board-meeting route (194J).
- GST note for non-executive directors. Sitting fees to non-executive or independent directors attract GST at 18% under reverse charge (Notification 13/2017-CT as amended by Notification 29/2019-CT). The company pays the GST, not the director — a separate liability that runs alongside 194J.
- Report in Form 26Q. Sitting fees, commission, professional fees and director payments all sit in the same quarterly non-salary TDS return. Deposit TDS by the 7th of the following month (March by 30 April).
FAQ
Is there a threshold for TDS on director sitting fees?
Under the prevailing position, director payments under 194J carry no threshold — 10% TDS applies from the first rupee. The ₹50,000 aggregate threshold (raised from ₹30,000 from FY 2025-26) is for professional and technical fees. on the firm's practice.
Executive director salary — 192 or 194J?
Section 192. Salary chargeable under the head "Salaries" is withheld at slab rates on an annualised basis. Sitting fees received on top of salary are 194J.
Do commission payments to non-executive directors attract TDS?
Yes. Commission to a non-executive director is remuneration to a director under 194J at 10%, separate from any sitting fees.
What is the rate if the director provides no PAN?
20% under Section 206AA instead of 10%. Collect and verify each director's PAN before the first meeting of the year.
Do we need a board resolution for sitting fees?
Yes. Sitting fees are authorised by Section 197(5) and fixed by board resolution. For unlisted private companies there is no statutory per-meeting cap (the ₹1,00,000 Rule 4 cap applies to listed companies).
Is GST payable on sitting fees?
Yes, in most cases. Sitting fees to non-executive/independent directors attract 18% GST under reverse charge; the company discharges it. Salary under Section 192 is outside GST.
Sources
- Section 194J, Income-tax Act 1961 (clauses covering professional/technical fees and director remuneration)
- Section 192 (salary TDS); Finance Act 2025 (194J threshold ₹30,000 → ₹50,000, w.e.f. 01-04-2025)
- Companies Act 2013: Section 197(5) (sitting fees), Section 197 and Schedule V (remuneration limits), Rule 4, Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014
- Notification 13/2017-CT as amended by Notification 29/2019-CT (GST reverse charge on non-executive director sitting fees)
- Sections 40(a)(ia), 201(1A), 206AA
Use the TDS rate finder to confirm the section and rate for director payments. For a TDS and ROC compliance audit of your company, visit pvtltd.co.
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