Every individual working in the registered sector in India has to pay a specific amount of applicable tax on their income. Now you may wonder what about individuals earning from unregulated means like commissions and brokerages.
Since these also constitute a source of income, therefore commissions and brokerages are also subject to TDS deduction under Section 194H of Income Tax in India.
Section 194H of Income Tax Act deals with TDS levied on the earnings received as commission or brokerage.
Persons other than individuals and HUFs are liable to pay this tax. It is applicable only on income exceeding ₹ 15000 in a financial year. However, individuals and HUFs who need to get tax audit done under section 44AB have to pay this TDS.
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TAN of the deductor and PAN of the deductee are the most important details required for TDS deduction.
An authorised entity can deduct TDS on brokerage and commission under Section 194H while:
TDS is the tax deducted at source on the amount payable to the service provider. It is then remitted to the Central Government of India. Only authorised entities can deduct TDS. Neither an individual nor a HUF (Hindu Undivided Family) can do so except for those who need to get their tax audit conducted. The 194H threshold limit of deduction is ₹ 15000.
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The due date to pay the TDS deducted during April and February is the 7th day of every month. For the month of March, the due date to deposit is 30th April. For instance, if TDS on brokerage is deducted on 15th December, it should be deposited with the Government before 7th January.
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TDS deduction rates under Section 194H for FY 2022-23 is 5%. However, if the payee cannot provide PAN details, the TDS deduction will be at 20%.
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Additional surcharge and education cess are not imposed on the TDS rate. However, different sections under TDS have different rates of deductions.
Commission or brokerage is a broad term that comprises the amount received by an individual for working on behalf of another entity. For instance, a building owner is selling his house to a buyer, and you are connecting the buyer and the seller. Then the amount you will get from them is commission. TDS deduction will be applicable if the payer is authorized for TDS deduction.
Parameters considered as commission under section 194H are:
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Under 194H TDS on commission, an entity can claim lower or Nil deduction when the amount deducted is higher than the total amount liable as income tax in a fiscal year. To apply for such a deduction, you have to file Form 13 and submit it online to the income tax department.
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Exemption of TDS deduction takes place in the following cases:
TDS deduction is a vast chapter. There are different sections under TDS; however, here, we have a focus on section 194H. All this information will help you know the exemption scenarios, applicability, and tax limitations on brokerage services.
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Disclaimer: This information is added only for informative purposes and collected from different sources across the Internet. Digit Insurance is not promoting or recommending anything here. Please verify the information before making any decisions.
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