TAX DEDUCTED AT SOURCE ON PAYMENT OF COMMISSION OR BROKERAGE, SECTION 194H.
Section 192,193 and 194 to 194S provided tax deducted at source on different payments with different limits. In this article I am going to explain about Tax Deduction at Source on payment of Commission or Brokerage, under section 194H, of the Income Tax Act, 1961.
Section 194H provides that at the time of credit or payment, whichever is earlier, when aggregate sums credited or paid during the financial year exceeds Rs. 20,000, tax is to be deducted at the rate of 2% to the resident of India. Commission does not include insurance commission referred to in section 194D.
Please remember that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the amount of, the payee, does not exceed Rs.20000 from financial year 2025-26, before that the amount was of Rs.15,000.
An individual or Hindu Undivided Family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed, one crore rupees in case of business or fifty lakh rupees, in the case of a profession, during 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.
From 1st April, 2010, if Permanent Account Number is not provided Tax will be deducted @ 20% instead of 2%.
In this section they have clarified, that “commission and brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered, which does not include professional services, or for any services in the course of goods or in relation to any transection relating to any asset, valuable article or thing, not being securities.
Therefore on brokerage of shares tax is not to be deducted. This will cover u/s 196D.
Professional services means services rendered by a person in the course of carrying on legal, medical, engineering or architectural work done by an advocate, chartered accountant, doctor, engineer, architect profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA. These types of services are covered u/s 194J of the Income-Tax Act.
The question arise that when consignee or agent have not paid the amount of brokerage to agent and only the amount of sale has given, whether tax is to be deducted?
Under this circumstances, when principal has not given the amount of brokerage and only the sale price has been paid, it is to be presume that it is Constructive Payment and tax is to be deducted. Circular No 619 dated 4th December, 1991.
Under section 194H, when payment of commission or brokerage and not as discount. When airlines Company booked ticket pay commission to travel agent, whether tax is to be deducted on that commission? The answer is YES.
CIT Vs. Singapore Airlines Limited (2009) 180 TEXMAN 128 Delhi High Court.
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