This article deals with tds on brokerage or commission as regulated by section 194H of the Income Tax Act, 1961
Section 194H focuses on income tax levied on any income by means of brokerage or commission, by any individual who is accountable for paying any amount pertaining to the said nature to a resident, if such income exceeds Rs. 15000. Therefore, any person who is responsible for paying any amount in nature of commission or brokerage to a resident shall deduct tax on behalf of the other and remit the same to the government on his behalf.
Commission or Brokerage includes any payment made in relation to purchase or sale of goods or services (except professional services) or any asset, valuable article or thing (except securities) to a person acting on behalf of the other as an intermediary in relation to the abovementioned transactions.
Deduction will be made
Generally, the tax deducted will be required to be deposited within one week from the end of the month in which such TDS has been deducted. Say, for the month of January the due date is 7th February, just as for the month of March, the TDS will be required to be deposited by 30th April.
The rate at which the tds is required to be deducted is 5% of the gross amount of the commission paid. This rate of tax has been reduced from 10% to 5% in Budget 2016 which is applicable with effect from 01.04.2016.
In the case where the PAN of the deductee is not available, TDS will be required to be deducted at a rate of 20%.
Note: If the deductee has furnished an application under section 197 for deduction of tax at a lower or nil rate, then the TDS would be required to be deducted at that respective lower rate or not required to be deducted.
TDS is not required to be deducted in the following cases:
There are certain conditions, as discussed below, where the deduction of TDS is exempted on commission or brokerage.
All deductors must ensure the proper and timely issue of certificates to the concerned deductee. The certificate must be issued on the following dates:
|For the Quarter||Time limit for depositing the TDS|
|April – June||30th July|
|July – September||30th October|
|October – December||30th January|
|January – March||30th May|
TDS will not be deducted from the additional component of GST but only on the basic value of the commission paid.
TDS under section 194H is not inclusive of Incentives or discounts provided and offered to the distributors.