Section 194H – TDS on Commission and Brokerage

Updated: 20-05-2024 08:01:06 AM

Section 194H of the Income Tax Act underlines the provision for a tax deduction on earnings as the commission or brokerage by a resident individual. The section, however, excludes the commission earned through insurance sales. A resident individual or the member of Hindu Undivided Family, who is liable to pay any type of commission or brokerage (excluding the insurance commission) is liable for tax deduction under the section 194H. The TDS should be deducted at the time of payment in cash or by cheque or draft. The current TDS rate applicable under section 1194H is at 10%.

TDS on Commission /Brokerage

TDS on commission or brokerage is to be deducted by all types of entities including individual & HUF who falls under the ambit of tax audit U/S 44AB i.e. their turnover or annual income exceeds 25 lakh and goes up to 1 crore (as applicable according to the income tax slab).

• No extra surcharge or education cess is required to be levied over & above the TDS amount at a specified rate. Hence, the TDS is deducted at a flat rate of 10%, inclusive of service (if applicable).
• The TDS amount deducted under the section 194H is required to be deposited with the government prior the due date of the payment by the entity which is responsible for deducting TDS. While depositing the TDS, the TAN and PAN number of both entities is required.

Definition of Commission /Brokerage

Commission or brokerage for the purpose of TDS deduction shall mean “any such payment received or receivable, directly or indirectly either by the person himself or on the behalf of another person for services provided (except any professional/ legal service)”. This includes any transaction pertaining to valuable goods, asset or articles. However, there are some general exceptions on few type of commission on which no TDS i.e. the provisions of section 194H is applicable.

• Commission or brokerage paid to loan/insurance underwriters.
• Brokerage / sub-brokerage paid towards the public issue of securities.
• Brokerage paid on the transaction of securities on any listed stock exchanges.