TDS UNDER SECTION 194H AND 194D

It is often observed that people get confused between section 194H and 194D. Proper interpretation of the section is crucial as it will aid in correct deduction of tax.  In this article we will discuss   both the sections so as to get clear view of the same.

SCOPE OF SECTION 194D

• Person responsible for paying to a resident commission or otherwise for soliciting or procuring insurance business including continuance, renewal or revival of policies is required to deduct TDS.
• TDS is required to be deducted only when the aggregate of the amounts of such income credited or paid or likely to be paid or credited during the financial year exceeds Rs. 20,000. (Rs. 15,000 from 1st June 2016)
• TDS is required to be deducted at the time of credit of such amount or payment thereof whichever is earlier.

SCOPE OF SECTION 194H

• Section 194H is for income tax deducted on any income by way of commission or brokerage, by any person responsible for paying to a resident.
• Individuals and Hindu Undivided Family who were covered under section 44AB are also required to deduct TDS.

What do you mean by Commission and Brokerage?

Commission or brokerage includes any payment

• received or receivable,
• directly or indirectly, OR
• by a person acting on behalf of another person

TDS on commission or brokerage includes,

1. for services rendered (not being professional services), or
2. for any services in the course of buying or selling of goods, or
3. in relation to any transaction relating to any asset, valuable article or thing, except securities.

SUMMARY OF SECTION “194 D” AND SECTION “194 H”

BASIS	194 D	194 H
Who is the taxpayer	Any person paying Insurance Commission	Any person paying commission or brokerage
Who is the recipient	A resident person	A resident person
Payment covered	Insurance Commission	Commission or brokerag excluding insurance commission
Threshold Limit	Rs. 15,000	Rs. 15,000
Rate A) PAN furnished   B) PAN is not furnished	5%   20%	5% 20%

Maitri Badani (CA-Intermediate)