Section 194H of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on payments made as commission or brokerage to resident individuals/entities. Below is a detailed breakdown of its provisions, exemptions, and compliance requirements.
1. Applicability of Section 194H
✅ Covered Payments:
- Commission(e.g., sales agents, referral fees).
- Brokerage(stockbrokers, real estate brokers).
- Any payment for services rendered as an intermediary.
❌ Exclusions:
- Insurance commission(covered under Section 194D).
- Payments to non-residents(covered under Section 195).
- Transactions below ₹15,000/year(per payee).
2. TDS Rate & Threshold
| PARAMETER | DETAILS |
| Standard Rate | 5% (if PAN provided). |
| PAN Not Provided | 20% (under Section 206AA). |
| Threshold | ₹15,000/year per payee (aggregate). |
Example:
- Brokerage Paid: ₹20,000 (PAN provided).
- TDS (5%): ₹1,000 → Net Payment: ₹19,000.
3. Who Deducts TDS?
- Banks, NBFCs, and financial institutions.
- Companies, firms, or individuals with business turnover > ₹1Cr.
- Any person making commission payments above threshold.
4. Compliance Requirements
- TDS Deduction: At the earlier of:
- Credit to payee’s account.
- Actual payment (cash/cheque).
- TDS Deposit: By the 7th of the next month(March: April 30).
- TDS Return: File Form 26Q
- TDS Certificate: Issue Form 16Ato payee within 15 days of return filing.
5. Exemptions & Lower Deduction
- No TDSif total commission ≤ ₹15,000/year per payee.
- Form 15G/15H: If payee’s income is below taxable limits.
- Lower TDS Certificate (Form 13): Obtain from the Assessing Officer if tax liability is nil/low.
6. Penalties for Non-Compliance
- Late Deduction: Interest @ 1% per month.
- Late Payment: Interest @ 5% per month.
- Non-Filing (Form 26Q): Penalty up to ₹1 lakh.
7. Key Points
✅ 5% TDS on commission/brokerage > ₹15K per payee.
✅ PAN Mandatory to avoid 20% deduction.
✅ Track Aggregates: Deduct TDS only if annual payments exceed ₹15K.
✅ File Quarterly Returns: Use Form 26Q.
