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Section 194H-TDS on Commission and Brokerage[2024]

Section 194H -TDS on Commission & Brokerage

A quick guide on Section 194H- TDS on commission and brokerage. Sec.194H of the Income Tax Act deals with TDS on Commission and brokerage income.

As per this section, any person responsible for paying to a resident any income by way of commission (not being insurance commission referred u/s 194D) or brokerage shall, at the time of credit of such income or at the time of payment, whichever is earlier, deduct an amount equal to 5% of such income as TDS.

What is TDS?

TDS stands for Tax Deducted at Source, it is a system of tax collection by the central govt., where the person responsible for making specified payments such as salary, rent, professional fees, commission, etc. is liable to deduct a certain percentage of tax before making payment in full to the recipient.

What is Section 194H of the Income Tax Act?

Section 194H of the Income Tax Act deals with TDS on Commission or Brokerage. As per this section, any person responsible for paying a resident:

  • any income by way of commission (not being insurance commission referred u/s 194D) or brokerage,
  • shall, at the time of credit of such income or at the time of payment, whichever is earlier, deduct an amount equal to 5% of such income as income tax thereon.

Thus in simple words, Section 194H specifies that if the commission or brokerage payment exceeds a certain threshold (currently Rs.15,000), you are liable to deduct 5% of the payment as TDS.

The remaining 95% is to be paid. The TDS amount deducted needs to be submitted to the government account on or before the due date specified. 

Threshold limit for deduction of TDS under section 194H

Section 194H is applicable only if the commission or brokerage paid in a financial year exceeds the limit of Rs. 15,000.

A person deducting TDS is also required to obtain a PAN from the payee and mention the same in the TDS return.

Who is liable to deduct TDS under section 194H?

Any person who is responsible for paying commission or brokerage to a resident person is liable to deduct TDS under Section 194H.

Therefore, It’s important for businesses to be aware of TDS provisions like 194H to fulfill their tax obligations. By deducting and depositing the TDS correctly, businesses can comply with the law and avoid any penalties or legal complications.

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Rate of TDS under section 194H

The rate of TDS under section 194H is fixed at 5%. However, in case the payee (deductee) doesn’t furnish his PAN, TDS will be deducted @ 20% i.e. at a higher rate.

Note: Recipient of the commission or brokerage can claim refund of TDS amount by filing his or her income tax return (ITR)

faq on tds on commission 194h

FAQs on TDS on commission under section 194H

Here are some frequently asked questions about Section 194H:

Who is liable to deduct TDS under Section 194H?

Any person who is responsible for paying commission or brokerage to a resident person is liable to deduct TDS under Section 194H.

What is the rate of TDS under Section 194H?

The rate of TDS under Section 194H is 5% on the amount of commission or brokerage paid.

Is there any threshold limit for the deduction of TDS under Section 194H?

Yes, TDS under Section 194H is applicable only if the amount of commission or brokerage paid during the financial year exceeds Rs. 15,000.

What is the due date for depositing TDS under Section 194H?

TDS deducted under Section 194H must be deposited on or before the due date. Due date is by the 7th of the following month* in which the deduction is made.

*For the month April to Feb: 7th of the next month
For the month of March: 30th April

What is the penalty for non-compliance with Section 194H?

If the TDS deducted under Section 194H is not deposited or is deposited late, then the deductor may be subject to penalties and interest under the Income Tax Act.

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About Shubham Anand

Shubham Anand, the founder of TaxWinner.in, is a Chartered accountant, law graduate and personal finance & technology enthusiast. He loves writing about taxes, personal finance, tax planning, the latest technology, and much more. With a passion for technology and the intricacies of personal finance, he believes that financial literacy is the ultimate life hack.

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