Section 194H of the Income-tax Act requires non-individual and non-HUF payers to deduct 5% TDS on commission or brokerage paid to residents from June 1, 2001. A recent amendment proposes reducing this rate to 2% effective October 1, 2024.
Section 194H – Payment of commission or brokerage
As per provisions of section 194H, any person, not being an individual or a Hindu undivided family (as specified), who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being 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 thereon at the rate of 5%.
2. It is proposed that TDS under section 194H of the Act be reduced from 5% to 2%.
3. The amendment will take effect from 1st day of October 2024.
Extract of Clause 57 of Finance Bill 2024
Clause 57 of the Bill seeks to amend section 194H of the Income-tax Act relating to commission or brokerage.
The said section, inter alia, provides that any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being 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 thereon at the rate of five per cent.
It is proposed to amend the said section so as to reduce the said rate of tax deduction from five per cent. to two per cent.
This amendment will take effect from 1st October, 2024.
Proposed Amendment to section 194H of Income Tax Act, 1961 vide Finance Bill, 2024
In section 194H of the Income-tax Act, for the words “five per cent.”, the words “two per cent.” shall be substituted with effect from the 1st day of October, 2024.
