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.
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.
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.