194H: TDS on Commission or brokerage
Tax Deduction at Source (TDS) is a concept that generates continuous revenue for Government. If a person is unable to comply with the provisions of TDS the consequences are tough. In this article we will discuss in detail regarding one of the section of TDS in detail i.e. 194H of the Income Tax Act, 1961.
Section 194H of the Income Tax Act, 1961 requires TDS to be done on any income by way of commission or brokerage. The person to whom the amount of commission is paid shall be resident of India. TDS is to be done by any person other than individual and HUF. An individual and HUF are also required to deduct Tax if the gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB i.e. Rs. 1 Cr during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid. Section 194H does not include insurance commission referred to in section 194D.
TDS under Section 194H shall be deducted at the time of credit of such income to the account of the payee or to any other account including suspense account or by any other name 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.
“commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) 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, not being securities.
The expression “professional services” means 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 the purposes of section 44AA;
CAREFULLY NOTE, a person involved in the business of Commission is not allowed to opt for Presumptive Taxation u/s 44AD.
The rate of TDS is to be done is 5%. No surcharge, education cess or SHEC shall be added to the above rates. Hence, the tax will be deducted at source at the basic rate. The rate of TDS will be 20% in the cases if PAN is NOT quoted by the deductee.
It is not that if the commission is Rs. 10 tax is to be deducted. The Government has provided the threshold limit of RS. 15000. No tax is to be deducted if the aggregate amounts of commission or brokerage income credited or paid during the financial year does not exceed Rs.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.
Tax Deducted during the month shall be paid on or before the 7th of following month. However, for the month of March TDS is to be deposited on or before 30th April.
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