Section 194H: Understanding TDS on Commission and Brokerage Income

TDS is deducted from various sources of income as mandated by Section 194 of the Income Tax Act, 1961. Section 194H outlines guidelines about the tax deductions that need to be made on brokerage and commission earnings.

As per its provisions, taxpayers need to deduct TDS on commission and brokerage when paying a resident whose annual income exceeds the amount of ₹15,000. Moreover, under Section 194H, the rate of TDS has been fixed at 5%.

Definition of Brokerage and Commission Under the Income Tax Act

Under Section 194H of the Income Tax Act, the following payments constitute brokerage and commission:

A payment received by a person on behalf of another person for services not considered “professional services”
A payment received for any services in buying or selling goods
A transaction made for valuable assets or items other than securities

Exemptions Available Under Section 194H

You enjoy TDS exemption on certain cases under Section 194H of the Income Tax Act. The exemptions are listed below:

When the brokerage or commission is less than ₹15,000
Commission paid to insurance or loan underwriters
Payments made by RBI to banks
Payments made under the purview of central finance to financial corporations
Any brokerage paid towards the public issue of securities
Interest from the NRE account

When to Pay TDS Under Section 194H

Check the following table to know about the due dates for paying Section 194H TDS:

TDS Deduction Timeframe	Due Date
TDS Deductions Between April and February	7th Day of the Next Month
TDS Deductions in March	April 30th

How to Claim Nil or Lower TDS on Commissions

You can claim lower or nil tax deductions if the deducted amount is higher than the income tax that you are liable to pay. Under Section 197, you can claim a lower deduction in such a case for that financial year.

However, to apply for the same, you will have to submit Form 13 on the Income Tax portal. When filing Form 13 to claim lower deductions on brokerage and commission, you need to submit the following documents:

Your name and address
PAN card details
Purpose for which you received the brokerage or commission
Income-related details for the past three years
Expected income in the current fiscal year
Tax payments completed in the past three years
Tax payments completed in the current fiscal year

Is income earned as commission taxable?

Yes. As per Section 194H of the Income Tax Act, you need to deduct TDS on commission payable to a resident earning over ₹15,000.

What is the rate of TDS under Section 194H of the Income Tax Act?

The rate of TDS on brokerage and commission is 5%.

What is the Section 194H TDS limit that you need to pay on brokerage and commission?

Under Section 194H, the TDS limit for deduction is ₹15,000 for individuals and Hindu Undivided Families (HUFs).

What should you consider before paying for TDS on brokerage and commission?

The TDS is deducted at a rate fixed by the central government in the Union Budget. So, this rate is liable to change if the government amends the Finance Bill. Also, you must have PAN and TAN-related details to deposit TDS on the Income Tax portal.

What are Sections 194D and 194H?

Section 194D imposes a 5% TDS on insurance commission payments exceeding ₹15,000 annually. Similarly, Section 194H applies a 5% TDS on brokerage payments over ₹15,000 per year.

Which ITR is applicable for income under Section 194H?

For income under Section 194H, use ITR-3 if you earn from business or profession. If you're under the presumptive taxation scheme, use ITR-4.

What is Section 194H in income tax?

Section 194H imposes a 5% TDS on commission or brokerage payments exceeding ₹15,000 in a financial year. This TDS is applicable to payments not covered under salary.