What is Section 194H?
Section 194H of the Income Tax Act is specifically dedicated to TDS deducted on income earned through brokerage or commission by any person liable to pay to an Indian resident. This section ensures that tax is collected at the source on such payments.
It is important to note that Section 194H does not cover insurance commission, which falls under Section 194D.
The liability for TDS arises either at the time of providing credit in the book or at the time of making payment, whichever is earlier.
TDS Deduction Rate: A New Update
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
- 20% – PAN not provided
TDS on Commission or Brokerage Includes:
- Payment for services rendered, except for professional services
- Payment for services in the course of buying or selling goods
- Any transaction related to assets, valuable articles, or things, excluding securities
It should be noted that it covers amount received or receivable, directly or indirectly. It also includes receiving on behalf of another person.
Exemption – TDS Under Section 194H is Not Deductible
- Brokerage or commission is less than or equal to Rs. 15,000 in a financial year.
- The employer is paying a commission to the employee, u/s 192.
- Commission on insurance (u/s 197).
- Individuals with a NIL TDS certificate will get a TDS exemption.
- Payments made by TV channels and newspapers to the advertising agency for booking advertisements.
- Brokerage or commission for providing securities to the public.