Persons required to deduct and collect tax under section 194H
Any person who is responsible for paying to a resident, commission or brokerage is required to deduct TDS. If commission is payable in respect of insurance commission under section 194D then such commission is not covered under this section.
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
Commission or brokerage includes any payment received or receivable (not being commission or brokerage under section 194D) 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.
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)