Must Knows

TDS on commission: Section 194H and its applicability on TDS on brokerage

[ecis2016.org] TDS on commission is deducted at 5% under Section 194H. Know all about it in this guide.

TDS on commission

Just like any other income, TDS deduction applies to money earned as commission or brokerage. Section 194H of the Income-Tax Act deals with TDS on commission and TDS on brokerage.

[ecis2016.org] All you need to know about tax deducted at source and TDS full form

194H

Section 194H deals with income received as commission or brokerage. Commission or brokerage is the money earned for services rendered – not being professional services – in the process of buying / selling of goods or concerning any transaction relating to assets and valuable articles (not being securities). This section specifies that commission or brokerage does not include the insurance commission referred to in Section 194D.

Under 194H, anyone paying brokerage to a resident of India is responsible to deduct TDS on commission. Individuals and Hindu Undivided Families (HUF), covered under Section 44AB, are required to deduct TDS on brokerage and submit it with the Income Tax Department.

Section 44AB establishes that individuals and HUFs, with a business income exceeding Rs 1 crore, have to deduct TDS on commission. The same is true if their gross receipts from the profession are above Rs 50 lakhs.

Note that 194H is not applicable when the commission amount credited during a financial year does not exceed Rs 15,000.

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194H TDS: Time of TDS deduction

TDS on brokerage is deducted at the time of credit of the commission in the account of the payee.

 

194H TDS: Time of TDS payment

Between April and February, after deduction, TDS on commission must be deposited on or before the 7th of the next month. This means that if you deducted the TDS on brokerage in, say, January, you must deposit this amount with the Income Tax Department by February 7. For TDS deducted in March, the last date to deposit is April 30 of that year.

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TDS rate on commission

The TDS rate on commission is 5%. However, the rate becomes 20% if the PAN Card information of the payee is not available. No additional surcharge or education cess is imposed on the TDS commission rate.

[ecis2016.org] TDS rate chart for 2022

 

TDS commission rate: Exemption

Section 197 gives taxpayers in India the chance to apply for a lower rate of TDS or full exemption from TDS payment. Taxpayers must write an application to the income tax assessing officer. In case, provisions of 194H do not apply to you, make an application for partial or full exemption.

 

FAQs

Is TDS deductible on commission paid?

Yes, TDS is deductible on the commission you pay to another party under Section 194H.

What is the TDS rate on commission for FY 2020-21?

The TDS rate on commission for FY 2020-21 is 5% of the commission amount.

Who is liable to deduct TDS on commission?

The person paying the commission is liable to deduct TDS on commission.

What is the rate of TDS on commission?

The rate of TDS on commission is 5%.

What is the limit to deduct TDS u/s 194H?

The rate of TDS deduction on commission is 5%. However, this becomes 20% if the PAN details of the payee are not submitted.

Source: https://ecis2016.org/.
Copyright belongs to: ecis2016.org

Debora Berti

Università degli Studi di Firenze, IT

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