TDS on commission: Section 194H and its applicability on TDS on brokerage

TDS on commission

Just like any other income, TDS deduction applies to money earned as commission or brokerage. Section 194H of the Income-Tax Act deals with TDS on commission and TDS on brokerage.

See also: All you need to know about tax deducted at source and TDS full form

194H

Section 194H deals with income received as commission or brokerage. Commission or brokerage is the money earned for services rendered – not being professional services – in the process of buying / selling of goods or concerning any transaction relating to assets and valuable articles (not being securities). This section specifies that commission or brokerage does not include the insurance commission referred to in Section 194D.

Under 194H, anyone paying brokerage to a resident of India is responsible to deduct TDS on commission. Individuals and Hindu Undivided Families (HUF), covered under Section 44AB, are required to deduct TDS on brokerage and submit it with the Income Tax Department.

Section 44AB establishes that individuals and HUFs, with a business income exceeding Rs 1 crore, have to deduct TDS on commission. The same is true if their gross receipts from the profession are above Rs 50 lakhs.

Note that 194H is not applicable when the commission amount credited during a financial year does not exceed Rs 15,000.

Check out : Know about TDS full form 

See also: All about TDS on sale of property

194H TDS: Time of TDS deduction

TDS on brokerage is deducted at the time of credit of the commission in the account of the payee.

194H TDS: Time of TDS payment

Between April and February, after deduction, TDS on commission must be deposited on or before the 7th of the next month. This means that if you deducted the TDS on brokerage in, say, January, you must deposit this amount with the Income Tax Department by February 7. For TDS deducted in March, the last date to deposit is April 30 of that year.

See also: All about TDS on salary

TDS rate on commission

The TDS rate on commission is 5%. However, the rate becomes 20% if the PAN Card information of the payee is not available. No additional surcharge or education cess is imposed on the TDS commission rate.

See also: TDS rate chart for 2022

TDS commission rate: Exemption

Section 197 gives taxpayers in India the chance to apply for a lower rate of TDS or full exemption from TDS payment. Taxpayers must write an application to the income tax assessing officer. In case, provisions of 194H do not apply to you, make an application for partial or full exemption.

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Sunita Mishra

An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.

In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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