Section 194H: Know the Meaning and Essential Facts

TDS on commission is applicable under Section 194H of the Income Tax Act, 1961. The section of TDS on commission is concerned with the income tax that is levied on the income coming from commission or brokerage. An individual or HUF comes under this section of TDS on commission. In this article, we will understand what TDS on commission is and other details like TDS on commission limit and TDS on commission rate.

Section 194H of the Income Tax Act, 1961 deals with the income tax levied on an income earned through commission or brokerage by an individual accountable for paying to a resident. Those individuals and HUF (Hindu Undivided Family) that are covered under Section 44AB of the IT Act are also required to deduct the TDS.

When the income coming from commission or brokerage is deposited into the account of the payee or any other account given, a TDS on commission under Section 194H of the Income Tax Act, 1961 will have to be deducted. Note that Section 194H does not include the insurance commission that is mentioned in Section 194D.

Now, let’s understand the TDS on commission rate.

The TDS on commission rate is set at 5%. For transactions done between May 14, 2020 to March 31, 2021, the rate of TDS on commission is 3.75%. You should note that there is no additional charge or education cess applied on a payment to a resident. The TDS rate on commission becomes 20% if the PAN has not been delivered by the payee. An assessee can apply for no TDS or TDS at a lesser rate to the evaluating officer as specified under Section 197 of the Income Tax Act of India, 1961.

A TDS on commission income has to be deducted at the time of disbursement or credit to the account of the recipient, whatever happens earlier. This sum is considered as credited to the account of the payee if it is credited to a suspense account or account in any name. The TDS on commission will have to be required to deduct at the time of such credit.

In some cases, a TDS on commission need not be deducted. Mentioned below are such special scenarios when you are not required to deduct a TDS on commission income:

• If the amount or the aggregate amount of the said income to be credited or paid during a financial year is below ₹15,000, no TDS on commission will have to be deducted

• TDS is not a prerequisite on the commission that is owed by BSNL or MTNL to their public call franchises

• The amount is accountable to TDS under Section 192 of the Income Tax Act, TDS from the remuneration, and not under the said section if the commission is granted by the establishment to its worker

• A TDS on insurance commission is not deducted according to Section 192 but under Section 194D

• No TDS is deducted from the service tax amount. If a service tax is levied, then the TDS on commission or brokerage has to be reduced only from the money owed as commission and not the deductible amount on service tax

• TDS on commission income comes under the Section 194H of the Income Tax Act of India, 1961

• The TDS rate on commission or brokerage is 5% and 3.75% for transactions done between May 14, 2020, to March 31, 2021

• A commission or brokerage consists of any receivable payment (not being a commission or brokerage mentioned under Section 194D) directly or indirectly by any individual on behalf of another that consists of the following:

1. For availed services (not the specialised services)

2. With regard to any transaction that links to any asset, prized article apart from securities

3. For any service throughout purchasing or selling of things