Updated on November 28, 2024 01:19:08 PM
Commission is paid as a form of incentive to motivate individuals or teams to sell products or services.Brokerage is paid as a fee for the services that brokers provide in facilitating transactions, such as buying or selling stocks, real estate etc. Such compensations are considered as source of income under The Income Tax Act,1961 on which tax is deducted at source (TDS) u/s 194H when such commission or brokerage amounts to more than the prescribed limit. Read all details about section 194H TDS on commission or Brokerage.
TDS section 194H of the Income Tax Act, 1961 is a tax rule that ensures income tax is deducted & deposited from the payments of commission or Brokerage. It is applicable to any person paying commission or brokerage to a resident individual. TDS on commission or brokerage is deducted @ of 5%. With effect from 1st October, 2024 rate of TDS on commission or brokerage is to be deducted at 2% instead of 5%.
“Commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person
Section 194H, This section is applicable to “Any person other than Individual & HUF paying any commission or Brokerage to a Resident person is liable to deduct TDS under section 194-H”, as commission or brokerage is considered as source of Income.
Individual & HUF are required to deduct TDS, if last year turnover is greater than Rs.1 crore in case of business or Gross receipts is greater than Rs.50 lakhs in case of profession.
TDS u/s 194H is not applicable to insurance commision which is covered under section 194D.
TDS on commission or brokerage is 5% for transactions before 1st October 2024. Rate of TDS on commission or brokerage will be 2% instead of 5%, with effect from 1st october, 2024.The rate of TDS will be 20%, if the deductee (the person to whom payment is made) doesn’t provide PAN details.
Under section 194-H, TDS @ 2% is to be deducted from the payment of commission or Brokerage if aggregate amount of commission or brokerage exceeds Rs.15,000. No TDS on commission or brokerage u/s 194H is required to be deducted if commission or Brokerage is up to ₹15,000.
TDS on commission and Brokerage is required to be deducted :
TDS on commission or brokerage which is deducted and is required to be deposited to the central government. Time to deposit of TDS on commission or brokerage is below:
When TDS is deducted | When to deposit TDS |
---|---|
April - February | On or before 7th of next month |
March | On or before 30th April |
For example,Tax on commission is deducted on 15th December and needs to be deposited on or before 7th January. Tax on commission is deducted on 21st March ; needs to be deposited on or before 30th April.
If TDS is deducted on or behalf of the Government, it is deposited on the same day.
Under the following cases TDS u/s 194H is not Deducted:-
Here are the penalties and fines under TDS on commission and Brokerage:
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In general, we assist the client to solve their queries and doubts regarding the documentation, procedures, and fees for filling out the form. Other than making your filing successful, we help you make a better decision by covering every aspect of what you actually need to get your TDS.
In conclusion, section 194H of Income Tax Act covers details of TDS on commission or brokerage payments, ensuring that tax from such income is appropriately deducted and deposited with the government. Compliance with this section is essential for both payers and recipients to avoid penalties and interest.
Yes, the recipient can claim credit for the TDS deducted when filing their income tax return.
Yes, TDS must be deducted on commission payments made to non-residents. In such a case, Section 195 is applicable but the applicable TDS rates may differ based on Double Taxation Avoidance Agreements (DTAA).
Yes, you can claim expenses, but only after ensuring that TDS was properly deducted and deposited.
If TDS is deducted at a higher rate, the recipient can claim a refund while filing their Income tax return.