Section 194H – TDS on Commission & Brokerage

A complete guide of section 194H – TDS on Commission and Brokerage for A.Y.2017-18.

Who is Liable to Deduct TDS under section 194H?

Any person who is liable to pay commission or brokerage shall deduct TDS.

Here we will not talk about insurance commission. The TDS on insurance commission under section 194D has discussed here.

Individual and HUF but only who covered under section 44AB(a) and (b) in the preceding previous year.

Section 194H – Quick Summary of TDS on Commission & Brokerage

Person Responsible to Deduct Tax All Assessee except those individual and HUF who are not covered u/s 44 AB(a) or 44 AB(b) in the preceding previous year
Exemption Limit Rs. 15,000
Time of Deduction of TDS At the time of payment or credit whichever earlier.
Time for Deposit of TDS Within one week from of the day of the month of tax deduction. For month of March, before 30th April.
Certificate of TDS Form 16A for each quarter is to be issued within 15 days from the due date for furnishing the statement of tax deducted at source under rule 31A i.e. on or before 15th August, 15th November, 15th February and 15th June
Quarterly Return of TDS
AO’s Certificate for Deduction at Lower Rate or Non Deduction Yes, application in Form No. 13. Appropriate certificate to be issued by AO.
Is Self Declaration by Payee for Non Deduction Admissible No

Exemption Limit & Non-deduction of Tax

The exemption limit is Rs.15000 w.e.f. 1.6.2016 (Rs.5000 up to 31.5.2016)

On some transactions or specified payments, there is no need to deduct tax as follows:

  • Bank guarantee commission;
  • Cash management service charges;
  • Depository charges on maintenance of DEMAT accounts;
  • Charges for warehousing services for commodities;
  • Underwriting service charges;
  • Clearing charges (MICR charges);
  • Card or debit card commission for transaction between the merchant establishment and acquirer bank. 

TDS Rates on Commission & Brokerage

The rate of TDS is 5% (w.e.f. 1.6.2016) (10% up to 31.5.2016).

The rate of TDS will be 20% in case of PAN is not quoted by the deductee.

Time to Deduct TDS on Commission & Brokerage

The payer should deduct Tax on commission or brokerage at the time of payment or credit whichever is earlier.

When entry has made in the books of account treated as payment credit to the account of payee. So it is the liability of the payer to deduct TDS at the time of credit such payment.

Time Limit to Deposit TDS on Commission/Brokerage

In the case of office of the Government:

  • On the same day where the tax is paid without production of income-tax Challan
  • on or before 7 days from the end of the month in which the deduction is made, where tax is paid accompanied by an income-tax Challan.

In any other cases:

  • The TDS has to be deposited on or before 30th day of April, where the income or amount is credited or paid in the month of March;
  • In other case on or before 7 days from the end of the month in which the deduction is made.

TDS Returns/Statement

w.e.f. 1.6.2016 – Form No. 26Q

  • Before 31st July (for 1st Quarter)
  • 31st October (for 2nd Quarter)
  • 31st January (for IIIrd Quarter)
  • 31st May (for Last Quarter)

Deadlines to issue TDS certificate and form

Form 16A should be issued within 15 days from the due date for furnishing the statement of tax deducted at source.

  • 15th August
  • 15th November
  • 15th February
  • 15th June

Definition as per Income Tax Act: Commission or Brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person:

(a) for services rendered (not being professional services),x or

(b) for any services in the course of buying or selling of goods, or

(c) in relation to any transaction relating to any asset, valuable article or thing, not being securities.

The 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.

7 Comments

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  1. I’m a salaried person with 1.5 lacs invested in under sec80C and claimed deduction for interest on housing loan but have still ended up paying tax of 40k. I would like to know if financial auditor/CA can help reduce my tax obligation and get me refund

  2. I have been paid Rs. 11,000/- under 194H and the payer has deducted Rs. 1,100/- as TDS. Since the exemption limit is Rs. 15,000/-, can I claim refund of the TDS amount?

    1. Hi Sumanth, Yes you can claim of TDS refund. AS payer deducted your tax amount and deposited to the Government. It is immaterial that exemption limit is followed by the payer or not. So go ahead and claim your TDS refund. Thanks

      1. Thanks Pankaj.In ITR-1 form, I did not any provision to declare this income or claim refund of TDS deducted. Also, I’m filing IT returns along with my salary. Will this income have to clubbed with my salary?

        1. Hi Sumanth, Yes you have to add your commission income but it comes under “Income from other Sources” head not in salary head. Thanks

  3. Are we responsible for tds if,if payment is made to a foreign company towards commssion who is oprating from other country and have no office in india and is tax registred in other country.

  4. Pradipta Kumar Shatapathy

    Nice process.Justification of blessings of science.

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