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Section 194H of the Income Tax Act involves TDS on commission or brokerage payments, with exceptions. The TDS rate is 5% currently and will be reduced to 2% in 2024. This deduction is applicable at the time of payment or credit to the payee.
What is limit of TDS deduction on commission? Section 194H provides the exemption limit of INR 15,000 on TDS on commission i.e. TDS is deductible only if the aggregate amount of commission exceeds INR 15,000 during the Financial Year.
Threshold Limit: The TDS provisions of Section 194H are applicable only if the commission or brokerage payment to the payee exceeds ₹15,000 in aggregate during the financial year. If the total payment does not cross this threshold, no TDS needs to be deducted.
Effective from 1st October 2024, as per the Budget 2024 update, the TDS rate on brokerage and commission under Section 194H has been reduced from 5% to 2%. The summary is as under: 5% – Before 01/10/24. 2% – On or after 01/10/24.
The Income Tax (IT) Act's Section 194H allows a resident individual to deduct taxes at the source (TDS) on commission or brokerage. Since commission or brokerage is a source of income, anyone who pays any of these amounts is subject to TDS under section 194H.
Understand Section 194H of the Income-tax Act: It mandates a 5% TDS on commission or brokerage payments to residents, soon reducing to 2% from October 2024.
If you are making a payment of more than Rs. 15,000 in one financial year towards commission or brokerage, you can make a tax deduction of 5%. There won’t be any additional deduction in the form of surcharge. In case of the absence of a PAN card, the TDS can be a maximum of 20%.
TDS is not required on brokerage or commission payable by BSNL or MTNL to their public call office franchisees. If commission is paid by employer to its employee, then such commission is liable to TDS under Sec -192 – TDS from Salary and not under this section.
What is Section 194H? Section 194H of Income Tax Act deals with the taxes that are imposed on the earnings generated through commission or brokerage. Ideally, individuals and HUFs are deemed liable to pay taxes on such earnings.
According to section 194H, any person, other than an individual and Hindu Undivided Family (HUF), making commission or brokerage payments to a resident of India is required to deduct TDS at the time of making the payment.