TDS on Commision and Brokerage
Section 194H of the Income Tax Act, 1961 deals with Tax Deducted at Source (TDS) on commission or brokerage payments. As per this section, any person who is responsible for paying commission or brokerage to a resident individual, a Hindu Undivided Family (HUF), or a partnership firm, is required to deduct TDS at the time of payment.
The rate of TDS under Section 194H is 5% (plus applicable surcharge and cess) on the commission or brokerage amount. However, if the commission or brokerage paid or credited to the payee during the financial year does not exceed Rs. 15,000, then no TDS is required to be deducted.
TDS under Section 194H needs to be deducted at the time of payment or credit of the commission or brokerage, whichever is earlier. The person responsible for paying the commission or brokerage is required to deduct TDS at the rate of 5% (plus applicable surcharge and cess) on the amount paid or credited to the payee.
It is important to note that the TDS under Section 194H is applicable only if the commission or brokerage is paid or credited for carrying out the following activities:
- Sale of goods
- Sale of property other than securities
- Leasing of property
- Rendering of services by a stockbroker or a sub-broker in relation to securities
The person who is responsible for deducting TDS under Section 194H is required to obtain a Tax Deduction Account Number (TAN) and deduct the TDS at the time of payment or credit of the commission or brokerage, whichever is earlier. The TDS amount so deducted should be deposited to the credit of the government by the 7th of the following month in which the deduction is made.
The person deducting TDS is also required to issue a TDS certificate in Form 16A to the payee, which contains details of the TDS deducted and deposited. The payee can claim credit for the TDS deducted in his/her income tax return. In conclusion, TDS under Section 194H is applicable on commission or brokerage payments made to a resident individual, HUF, or partnership firm, subject to certain conditions. The rate of TDS is 5%, and TDS is required to be deducted and deposited to the government by the person making the payment. The payee can claim credit for the TDS deducted in his/her income tax
