Explore Section 194H of the Income Tax Act, covering TDS on commission and brokerage payments. Understand key features, tax rates, threshold limits, and obligations of deductors. Delve into relevant case laws for comprehensive insights into the application of Section 194H.
Section 194H of the Income Tax Act is a provision that deals with the deduction of tax at source on commission or brokerage payments. It applies to any person who is responsible for paying any income by way of commission or brokerage to a resident in India. Here are some key features of Section 194H:
1. Applicability: Section 194H applies to payments made to residents of India by way of commission or brokerage. It does not apply to payments made to non-residents.
2. Tax rate: The tax rate under Section 194H is 5% for individual and Hindu Undivided Family (HUF) payees and 10% for other payees.
3. Threshold limit: No tax is required to be deducted if the amount of commission or brokerage paid during the financial year is less than Rs. 15,000. If the amount exceeds Rs. 15,000, the tax must be deducted on the entire amount.
4. Time of deduction: Tax must be deducted at the time of credit of the commission or brokerage to the payee’s account or at the time of payment, whichever is earlier.
5. Obligations of the deductor: The person responsible for paying the commission or brokerage is required to deduct tax at source and remit it to the government within the specified timelines. The deductor must also issue a TDS certificate to the payee.
here’s a summary of all the case laws related to Section 194H of the Income Tax Act in bullet points:
1. Jeevan Diesels & Electricals Ltd. vs. DCIT: The threshold limit of Rs. 15,000 applies to each transaction and not to the aggregate of all transactions in a financial year. Commission paid to non-resident agents is not liable for TDS under Section 194H.
2. Star India Pvt. Ltd. vs. ACIT: Provisions of Section 194H are not applicable to payments made to agents for services rendered outside India. The threshold limit of Rs. 15,000 applies to each transaction and not to the aggregate of all transactions in a financial year.
3. CIT vs. Nirma Chemical Works Pvt. Ltd.: Section 194H does not apply to payments made to sub-brokers, as they are not agents of the payer.
4. BSNL vs. ACIT: Section 194H is not applicable to payments made by a principal to its franchisees for selling its products.
5. CIT vs. Punjab State Electricity Board: Section 194H is not applicable to payments made by a statutory body to its employees for collection of electricity bills.
6. Rajesh Kumar Gupta vs. ITO: Section 194H is not applicable to payments made by an individual to his tenant for sub-letting the premises.
7. DCIT vs. SMC Comtrade Ltd.: Section 194H is not applicable to payments made by a commodity exchange to its members for their participation in the trading activity.
8. Satyam Computer Services Ltd. vs. ACIT: Section 194H is not applicable to payments made by a software company to its employees for providing services to clients.
9. BSNL vs. DCIT: Section 194H is not applicable to payments made by a telecom company to its franchisees for providing telecom services to customers.
10. DCIT vs. National Agricultural Cooperative Marketing Federation of India Ltd.: Section 194H is not applicable to payments made by a cooperative society to its members for selling agricultural produce.
11. Airports Authority of India vs. ACIT: Section 194H is not applicable to payments made by the Airports Authority of India to airlines for sales of tickets as they are not acting as agents for the Airports Authority of India.
12. South Eastern Coalfields Ltd. vs. ACIT: Section 194H is not applicable to payments made by a coal company to its agents for the purchase of coal as the agents are not acting on behalf of the coal company.
13. UTI Asset Management Company Ltd. vs. ACIT: Section 194H is not applicable to payments made by a mutual fund to its distributors for selling mutual fund units.\
14. ITO vs. N. B. Bhushanam: Section 194H is not applicable to payments made by an employer to its employees for collecting insurance premium as it is part of the employment agreement.
15. The Hindu vs. DCIT: Section 194H is not applicable to payments made by a newspaper to its hawkers as they are not acting as agents of the newspaper
16. ICICI Bank Ltd. vs. DCIT: Section 194H is not applicable to payments made by a bank to its credit card agents for acquiring new customers as they are not acting on behalf of the bank.
17. CIT vs. Kotak Securities Ltd.: Section 194H is applicable to payments made by a stockbroker to its sub-broker for services rendered as they are acting as agents of the stockbroker.
18. Indian Oil Corporation Ltd. vs. ITO: Section 194H is not applicable to payments made by a company to its petrol pump dealers for sale of petroleum products as they are not acting as agents of the company.
19. Asstt. CIT vs. Insurance Brokers Association of India: Section 194H is not applicable to payments made by an association of insurance brokers to its members for conducting training programs as they are not acting as agents of the association.
20. CIT vs. Shri Ram Transport Finance Co. Ltd.: Section 194H is applicable to payments made by a finance company to its agents for recovery of dues as they are acting as agents of the finance company.
Author Bio
TDS rate for this section is only 5% no matter who the payee is.