TDS Rate on Commission and Brokerage – TDS on Commission / TDS on Brokerage under Section 194H of Income Tax Act
| Section | Section 194H of Income tax Act, 1961 |
| Particulars | TDS Rate on Commission and Brokerage |
| Type of business | Residents, Individuals, Hindu Undivided Family |
Commission and Brokerage
For the purpose of Section 194H, Commission or Brokerage includes any payment to a person who is acting on behalf of another person , and provides services (other than professional services which are covered under Section 194J) . Such services may be provided in the course of buying or selling goods , or may be services which are provided in relation to any transaction relating to any asset, valuable article or thing, other than securities.
Section 194H of Income Tax Act defines the term “professional services and securities” as services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for section 44AA.”
The expression “securities” shall have the meaning assigned to it under Section 2(h) of the Securities Contracts (Regulation) Act, 1956
| Who can be Payor? | Resident/Non Resident |
| Who can be Payee? | Resident |
| What is the Rate of Tax deduction | 5% |
| What is the timing of deduction of TDS | Date of credit or Date of payment whichever is earlier |
| What is the threshold limit | Not Exceeding Rs.15,000/- (Enroll for our TDS Course) |
| Whether Issue of Form 16A is compulsory? | Compulsory |
| What is the due date for issue of Form 16A | With in 15 days of filing of TDS return |
| Applicability on Government | |
| AO’s Certificate under section 197 | Can be obtained |
| Applicability of Section 206AA | Yes |
| Applicability of Section 285BB (Annual Information system) | Applicable |
| Applicability on person not covered under section 44AB | Applicable |
| Which TDS Return is applicable under Section 194H | 26Q |
| Applicability on commission paid by BSNL or MTNL to their public call office franchisees. | Not applicable |
| Applicability on payment made in the nature of Bank Guarantee Commission | Not applicable |
| Applicability on supplier of SIM Card or recharge coupons | Applicable |
| Applicability on payment on Principal to Principal basis | Not applicable |
| Applicability on commission paid where employer-employee relationship exists | Not applicable |
| Applicability on commission paid to Insurance agent | Not applicable |
| Applicability on Cash management service charges | Not applicable |
| Applicability on depository charges on maintenance of DEMAT Accounts | Not applicable |
| Applicability on underwriting service charges | Not applicable |
| Applicability on clearing charges | Not applicable |
Applicability of Deduction under section 194H of Income Tax Act on various Entities
A. Deduction of TDS – Person other than an Individual or a Hindu Undivided Family (HUF)
Any person other than an Individual or a HUF who pays a Resident any income by way of commission (other than insurance commission referred to in section 194D) or brokerage shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct Income Tax at the rate of 10%. No TDS is applicable if such income, or the aggregate of such income in a given financial year, is not more than Rs. 5000.
B. Individual or Hindu Undivided Family (HUF)
A person who is an Individual or a HUF whose total sales, gross revenues or turnover from the business or profession carried on by him exceeds Rs 1,00,00,000 in case of business, or Rs. 50,00,000 in case of profession in the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid shall be liable to deduct income-tax under this section at the rate of 10%.
Points to be noted
- Commissions and brokerage payments are subject to a 5% withholding tax or TDS by the party making the payment. only if the total brokerage or commission amount paid or owed is more than Rs. 15,000.
- Surcharge and Health & Education cess are not applicable, and the deductor must withhold tax at the rate specified in Section 206AA if the deductee does not provide PAN. It is to be noted that if the deductee has not filed the return of income for a specific period, then tax shall be deducted at the rate prescribed under Section 206AB.
Exemption from TDS under Section 194H of Income Tax Act
A. Commission paid by BSNL or MTNL
The public office franchisees of Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) are not subject to deduct tax on commission or brokerage payments.
B. Payment by stamp Vendor
The commission or brokerage fee paid on the stamps sold by licensed merchants does not come under Brokerage or commission preview.
C. Banks Turnover Commission
According to CBDT, RBI need not deduct tax from the amount of turnover commission given or credited by it to the bank in exchange for the bank’s services in collecting the tax and issuing the tax refunds.
D. Commission or Brokerage to the Government
Any amount owed in the form of brokerage or commission towards the Government, Reserve Bank of India, a mutual fund, or a corporation formed under the Act is exempt from the deduction.
Learn more about Tax Deduction at Source (TDS)
TDS Sections
- Section 192 of Income tax act
- Section 193 of Income tax act
- Section 194 of Income tax act
- Section 194B of Income tax act
- Section 194C of Income tax act
- Section194EE of Income tax act
- Section 194H of Income tax act
- Section 194I of Income tax act
- Section 194IA of Income tax act
- Section 194 J of Income tax act
- Section 194K of Income tax act
- Section 194LD of Income tax act
- Section 194LBB of Income tax act
- Section 194M of Income tax act
- Section 194N of Income tax act
- Section 194O of Income tax act
- Section 194Q of Income tax act
- Section 194R of Income tax act
