Income Tax Act Section 194H is primarily involved with the amount of income tax charged on income generated through commission or brokerage. TDS deduction is required for any person who is responsible for paying commission (the commission should not be taken for anything related to insurance), that is, brokerage or commission defined under section 194D. Individuals and the Hindu Undivided Family are required to pay TDS on Commission.
What are Brokerage and Commission?
Section 194H of the Income Tax Act refers to “Commission and Brokerage” as any payout receivable or received, actively or passively, by an individual acting as a representative of another individual for services provided (other than professional) or for any rendered services in the topic of selling or purchasing products or in regards of any payment relating to an asset, beneficial article, or item that is not stocks or any other security.
What does Income Tax Act Section 194H implies?
When TDS on Commission needs to be deducted under Section 194H?
TDS on commission under Income Tax Act Section 194H shall be deducted when such income is credited to the payee’s account or any other provided account. Whether referred to as a suspense account or any other term during payment, of such money in cash, by the issuance of a draught, cheque, or via any other method.
What is the TDS on Commission Rate?
TDS is deducted at a rate of 5%. The TDS on commission levied is 3.75% for transactions made between 14th May 2020 and 31st March 2021. There will be no education cess, surcharge, or SHEC applied to the aforesaid rates. As a result, the basic rate of TDS on commission will be levied at the point of sale. If the deductee does not provide PAN details, the TDS rate will be fixed by 20% in all circumstances.
TDS on Commission at a Lesser Rate
The deductee (the individual whose TDS is deducted) may apply to the current assessing officer under Income Tax Act Section 197 for a tax deduction at NIL or a lesser rate.
When TDS on Commission needs to be deposited?
Taxes deducted from April to February must be deposited before or on the 7th day of the following month. TDS on commission deducted in March must be deposited before or on April 30th.
For instance, TDS deducted on April 25th must be submitted before or on May 7th, while TDS deducted on March 15th must be submitted before or on April 30th.
Section 194H applies to TDS deducted on commission or brokerage revenue by any individual responsible for payment to any resident. Persons and Hindu Undivided Families covered by Section 44AB must deduct TDS on commission. Individuals and HUFs with a company turnover of more than 100,00,000 INR or total receipts from any profession of more than 50,00,000 will be obliged to deduct TDS on commission beginning in the fiscal year 2020-21. However, it should be noted that Section 194H TDS on commission does not include commission related to an insurance policy under Section 194D.
TDS on commission under Income Tax Act Section 194H needs to be deducted at the moment such income is credited to the account of the payee or any other account termed by any other title, or at the moment payment is made by any method, whichever is earlier.
No. TDS on commissions under Section 194H should not be deducted on commissions related to insurance policies under Section 194D.