Section 194H TDS on Commission & Brokerage Analysis: As per Section 194H, any person who is not an individual or a Hindu Undivided Family and is responsible for paying any income by the way of commission(not being commission as referred to in section 194D) or brokerage to a person for his services(not being professional services) shall deduct income-tax thereon at the rate of 5%, at the time of credit of such income to the account of the payee or any other account by cash, cheque, draft or any other mode of transaction.
Commission or brokerage includes direct or indirect payment received or receivable by a person acting on behalf of another person. The payment may be received for:
- Any services rendered that do not come under professional services.
- Any service in the course of selling and buying of goods or materials.
- Any service in relation to the transaction of assets or valuable article. This does not include securities.
The following transaction related to securities do not attract TDS deduction under Section 194H:
- Brokerage or commission paid to underwriters.
- Brokerage or sub-brokerage paid on the public issue of securities
- Brokerage paid on stock exchange transaction of securities.
Table of Content
- Deductions Under 194H
- TDS Deduction Under Section 194H
- Additional Pointers regarding TDS Deduction Under Section 194H
Deductions Under 194H
Any person who is responsible for paying any income by way of commission or brokerage shall deduct income-tax thereon. This is only applicable to persons other than individuals or Hindu Undivided families.
TDS Deduction Under Section 194H
An individual or HUF is liable for deduction of TDS under section 194H if the total sales, gross receipts or annual turnover exceed:
- Rupees One crore, in case of a business during the financial year immediately preceding the year in which the commission is to be credited or paid.
- Rupees Fifty lakh, in case of an individual during the financial year immediately preceding the year in which the commission is to be credited or paid.
The deduction is made at the time of credit of such payment through cash, cheque, draft or any other mode of transaction to the account of the payee or any other account, which may be termed as a suspense account or by any other name at the time of translation.
The rate at which tax deduction under TDS is made is 5%, but w.e.f 14/05/2020 to 31/03/2021 this was reduced to 3.75%. This rate is not subject to any additional charge such as surcharge or health and education cess (@4%)and is deducted at a basic rate at the source. However, in case if the PAN is not quoted by the deductee, the rate at which tax deduction is made will be 20%.
The deduction has to be deposited on or before the 7th of next month for tax deducted from April to February and for tax deductions made in the month of March, the last day to deposit the deduction is 30th April.
TDS deductions under 194H are not applicable in the following cases:
- If the amount or aggregate amounts of such income exceed Rs.15000, to be paid during the financial year, then no deductions are made under this section.
- No tax deductions are to be made brokerage or Commission fees are paid by BSNL/MTNL to their public call office franchise.
- An application to the assessing officer for deduction of tax at NIL or lower rate under section 197:
- Validate the PAN of the deductee by submitting the 197 certifications.
- A valid certificate for the PAN, section, rate and the financial year must be mentioned in the statement field.
- The correct certificate number should be mentioned in the statement.
Additional Pointers regarding TDS Deduction Under Section 194H
- Any commission or supplementary commission received by travel agents from airlines is liable to TDS deduction under section 194H at the source.
- Any discounts that are given under pre-paid scheme of getting a connection by a mobile cellular operator to its distributors in the course of selling SIM cards do not attract TDS deduction under section 194H.
- Any advertise commission paid by Doordarshan to its agents or advertising agencies is subject to TDS deduction under section 194H.
- TDS deduction under section 194H is not applicable to discounts given to stamp vendors on bulk purchases.
- Â Payments made by television channels/newspapers to advertising agencies for booking or procuring of or canvassing of advertisement is defined as trade and not commission. Therefore, it does not attract any TDS deduction under section 194H.
- Commission paid to an agent as bank guarantee commission is not applicable for TDS deduction under section 194H as it is a banking charge for providing service and not commission.
- Target incentive paid to dealers for the purpose of increasing sales does not attract TDS deduction under section 194H and therefore assess does not need to deduct tax at the source.
- Any discount offered to distributors for promotion of sales does not attract TDS deduction under section 194H.