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Sec 194H – TDS on Commission or Brokerage

U.C Date : 16 May 2015

Persons required to deduct and collect tax under section 194H

Any person who is responsible for paying to a resident, commission (not being insurance commission u/s 194D) or brokerage is required to deduct TDS.
However in case of Individuals and HUF only those who are liable to audit under section 44AB (a),(b) due to turnover/receipts exceeding the specified limits i.e 1 crore/25 lakh as the case may be are liable to deduct tax on any type of payment including brokerage or commission.

Rate of TDS and Threshold limits under section 194H

From 1st June 2016 Before 1st June 2016
Threshold Limit Rs. 15,000 Rs. 5,000
If PAN is furnished 5% 10%
If PAN is not furnished 20% 20%

No surcharge or education cess is levied on payment to resident.
Assessee can apply to assessing officer for no TDS or TDS at lower rate under Section 197.

Time of Deduction

TDS is required to be deducted at the time of payment or credit to the account of such payee whichever is earlier.
If such amount is credited to suspense account or account of any name, it is considered as credited to account of payee and TDS is required to be deducted at time of such credit.

TDS not required to be deducted in following cases

  • TDS is required to be deducted only when the aggregate of the amounts of such income credited or paid or likely to be paid or credited during the financial year exceeds Rs. 5,000. (Rs. 15,000 from financial year 2016-17)
  • TDS is not required on brokerage or commission payable by BSNL or MTNL to their public call office franchisees.
  • If commission is paid by employer to its employee, then such commission is liable to TDS under Sec -192 – TDS from Salary and not under this section.
  • TDS on Insurance Commission shall not be deducted under this section but under Section 194D.

TDS not Deductible on Service Tax Amount

If service tax is applicable and levied then the TDS is required to be deducted only from the amount payable as brokerage or commission and not deductible on service tax amount. Circular No. 1/2014

Other Points

Commission or brokerage includes any payment received or receivable (not being commission or brokerage u/s 194D) directly or indirectly by a person acting on behalf of another person

  1. for services rendered (not being professional services) or
  2. for any services in the course of buying or selling of goods or
  3. in relation to any transaction relating to any asset, valuable article or thing not being securities.

Circulars and Case Laws

If the commission is retained by the agent while remitting the sale consideration, TDS on such commission amount is to be deposited by the principal. Circular no. 619 dated 4 Dec, 1991.

Discount given to stamp vendors for purchasing in bulk quantity is not commission as the nature of transaction is of sale-purchase transaction and not of principal agent. Therefore no TDS under sectin 194H is applicable. CIT vs Ahmedabad Stamp Vendors Association (2012)(SC)

Trade discount given by publisher of newspaper to advertising agency is not in nature of commission and thus no TDS under section 194H is applicable. Jagran Prakashan Ltd vs CIT (2012)

Also Read:

Bare Act for Sec 194H

Bare Act for Sec 194H

Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, 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 or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of  [ten] per cent :(5% from 1st June 2016)

Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed  [five thousand rupees] : (Rs. 15,000 from 1st June 2016)

[Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section:] [Provided also that no deduction shall be made under this section on any commission or brokerage payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office franchisees.]

Explanation.—For the purposes of this section,—

(i)  “commission or brokerage” includes any payment received or 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 or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities;

(ii)  the expression “professional services” means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA;

(iii)  the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ;

(iv)  where any income is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.]

4 comments

  1. can i deduct tds on cash commission payment to my commission agent , they get commission above 25000 per quarter. please reply they want benifit on cash commission also

  2. HOW TO PAY TDS UNDER SUB SECTION (6) OF SECTION 194C

  3. I got my form 16 from employer. also I received form 16A TDS Certificate from my builder where I Purchase d apartment. As a referral amount of 30,000 they deducted 3000 under 194H and given certificate. Now where shall I enter the 30000 details in ITR4s while submitting IT return through Income tax india Quick-Efile option.

    • Prateek Agarwal

      Go to the Tax Details Tab.
      In Sch TDS1- fill in the tds from salary details
      In Sch TDS2 – fill in the 194H tds details

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