Commission or Brokerage- Section 194H
As per section 194H, any person except individual & HUF, who is responsible for paying to a resident any income by way of commission or brokerage, shall deduct TDS at the 10%. However, this rate of TDS has been reduced from 10% to 5% in Budget 2016. This revised rate would be applicable from financial year 2016-17. Also, no additional surcharge or education cess is required to be added to the above rate.
However, Individuals and HUF are also liable to deduct TDS on commission or brokerage in case the individual or HUF is liable to get his books of accounts audited under section 44AB i.e; Turnover/ receipts exceed Rs. 50 lakhs/ 2 crore.
Explanation.—For the purposes of this section,—
(i) “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;
(ii) 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;
(iii) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(iv) where any income is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
Cases wherein TDS not to be deducted under section 194H
TDS is not liable to be deduction under Section 194H of the Income Tax Act in the following cases –
1. The aggregate amount of commission or brokerage credited / paid to the account of the payee doesn’t exceed INR 15,000.
2. The Commission or brokerage payable by the Bharat Sanchar Nigam Limited (BSNL) or Mahanagar Telephone Nigam Limited (MTNL) to their public call office franchisees.
3. The Bank guarantee commission.
4. The cash management service charges.
5. TDS on insurance commission is not deductible under section 194H, the same is specifically covered under section 194D.
6. The payee has applied for and obtained a certificate from the Assessing Officer under section 197 for NIL or lower deduction of TDS.
7. TDS on commission paid by the employer to its employee is deductible as per provisions of section 192 and not under section 194H.
What is the time limit on depositing TDS
Tax Deducted during the month of April to February is to be deposited on or before the 7th of next month. Tax Deducted in the month of March is to be deposited on or before 30th April.