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2019

Brief Note on TDS Under Section 194H

Brief Note on TDS Under Section 194H

Section 194H is for income tax deducted on any income by way of commission or brokerage, by any person responsible for paying to a resident. Individuals and Hindu Undivided Family who were covered under section 44AB are also required to deduct TDS. Section 194H does not include insurance commission referred to in section 194D.

Liability to Deduct TDS:

  • Any person, who is making payment to another person by way of commission or brokerage other than insurance commission, is liable to deduct TDS u/s 194H.
  • Individuals and Hindu Undivided Family who were covered under section 44AB are also required to deduct TDS.

Time of Deduction of TDS:

  • TDS under Section 194H will be deducted at the time of credit of such income to the account of the payee or to any other account.

OR

  • At the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode.

WHICHEVER IS EARLIER.

Scope of the Term Commission or Brokerage:

  • Commission or Brokerage includes any Payment:
    • Received or receivable.
    • Directly or indirectly, OR by a person acting on behalf of another person.
  • TDS on Commission or Brokerage includes:
    • For services rendered (not being professional services), or
    • For any services in the course of buying or selling of goods, or
    • In relation to any transaction relating to any asset, valuable article or thing, except securities.

Rate of TDS Deduction:

  • The Rate of TDS is 5%.
  • No Surcharge, Education Cess or SHEC shall be added to the above rates.
  • Hence, the tax will be deducted at source at the basic rate.
  • The rate of TDS will be 20% in all cases if PAN is NOT furnished by the deductee.

Threshold Limit for TDS deduction:

  • Rs. 15,000 per annum is the threshold limit for deduction of TDS.
  • This means, TDS u/s 194H is deductible if amount of payment towards commission or brokerage to a person exceeds Rs. 15,000 in a financial year.

Cases where TDS is not required to be deducted:

  • No deduction shall be made under this section in a case where the amount or the aggregate amounts of such income to be credited or paid during the financial year does not exceed INR 15,000.
  • Alternatively, the deductee can also make an application to the assessing officer under section 197 for deduction of tax at NIL rate or at a lower rate.

Time Limit for depositing TDS:

Tax Deducted during the month of April to February is to be deposited on or before the 7th of next month. Tax Deducted in the month of March is to be deposited on or before 30th April.
For example, tax deducted on 25th April is to be deposited on or before 7th May and tax deducted on 15th March is to be deposited on or before 30th April.

Cautions to be taken by Deductor:

  • Validate the PAN of the deductee submitting certificate 197.
  • The Certificate should be valid for the PAN, Section, Rate and relevant financial year which have been mentioned in the statement filed.
  • Verify that the threshold limit for the certificate has not been exceeded in previous quarters.
  • Correct certificate number should be quoted in the statement.

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