Any person who is responsible for paying any income by way of commission (other than insurance commission) or brokerage to a resident shall deduct income tax at the rate of 5% under Section 194H of Income Tax Act, 1961.
However, an individual or HUF whose total sales, gross receipts or turnover from the business or profession carried on by him do not exceed the monetary limits of 1 crore and 50 lakhs, respectively, specified under section 44AB during the immediately preceding financial year is not liable to deduct tax at source.
Meaning of Commission:
Commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered, or for any services in the course of buying or selling of goods, or in relation to any transaction relating to any asset, valuable article or thing, other than securities.
(1) Time of TDS deduction under Section 194H
The deduction shall be made at the time such income is credited to the account of the payee or at the time of payment in cash or by issue of cheque or draft or by any other mode, whichever is earlier.
(2) Threshold limit for TDS deduction under Section 194H
No deduction is required if the amount of such income or the aggregate of such amount does not exceed 15000 during the financial year.
(3) Non-applicability of TDS under section 194H
- This section is not applicable to professional services. “Professional Services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as notified by the CBDT for the purpose of compulsory maintenance of books of account under section
- No deduction shall be made under this section in a case where the amount or the aggregate amounts of such income to be credited or paid during the financial year does not exceed INR 15,000. The Person can make an application to the assessing officer under section 197 for deduction of tax at NIL rate or at a lower rate.
(4) Rate of TDS deduction under Section 194H
- The Rate is 5%.
- No Surcharge, EC or SHEC is added to this rate, however rate of TDS will be 20% is PAN is not furnished.
(5) When is it not required to deduct TDS Under Section 194H?
TDS is not required to be deducted in the following cases:
- TDS on Insurance commission as referred to in section 194D
- Commission paid by the employer to an employee will be covered by section 192
- Commission or brokerage payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office franchisees
- Brokerage or Commission paid to Underwriters in relation to public issue of securities
- Brokerage on stock exchange transactions of securities
- Bank guarantee Commission
- Cash management service charges
- Commodity warehousing service charges.