TDS rate on Commission – Section 194H

Applicability and Rate of TDS u/s 194H :

 Any person not being an individual/ HUF;

who is responsible for paying to a RESIDENT;

any income by way of commission (not being insurance commission referred to in section 194D) or

brokerage

shall at the time of credit of such income to the account of the payee or

at the time of payment of such income in cash/ cheque/ draft/ any other mode,

whichever is earlier, deduct income-tax thereon at the rate of 5%.

Monetary Limits :

TDS rate on  commission or brokerage shall be Nil,  where the amount of commission or brokerage   credited/ paid (or likely to be credited/ paid) during the FY, to the payee, does not exceed Rs. 15,000.

Non-applicability of TDS u/s 194H :

1. An individual/ HUF,  unless they were liable for tax audit during the FY immediately preceding the FY in which such commission/ brokerage is credited/ paid.
2. No deduction shall be made under this section on any commission/ brokerage payable by BSNL/ MTNL to their public call office franchisees.

Meaning of “Commission or Brokerage” :

1. “Commission or Brokerage” includes any payment received/ 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 / selling of goods; or
• in relation to any transaction relating to any asset/ valuable article/ thing, not being securities.

2. “Professional services” means services rendered by a person in the course of carrying on a legal, medical engineering or architectural profession the profession of accountancy or technical consultancy or interior decoration or such other profession as notified for the purposes of section 44AA
3. Brokerage in respect of transaction in securities is specifically excluded from purview of section 194H – [SHCIL Services Ltd. v. CIT]
4. Payment to banks for utilization of credit card facilities are in nature of bank charges, and not commission, and therefore, no tax is deductible at source u/s 194H – [Tata Teleservices Ltd. v. CIT, ITO v. Jet Airways (India) Ltd].
5. No surcharge, health and education cess shall be apply on tax deducted at source u/s 194H during the FY 2018-19.
6. If the recipient does not furnish his PAN to the deductor, tax will be deducted at the rate of 20%.