Decoding TDS on Commission or Brokerage: Section 194H Explained
Navigating the intricacies of Tax Deducted at Source (TDS) can be daunting, but it’s crucial for financial compliance. Section 194H of the Income Tax Act deals with TDS applicable to the payment of commissions or brokerage fees. Let’s break it down into digestible parts for better understanding.
What Does Section 194H Entail?
Under Section 194H, when you pay for services in the form of commission or brokerage, you must deduct TDS. This includes payments for services rendered (unless professional), services involved in the buying/selling of goods, and transactions related to valuable articles (excluding securities).
At What Rate is TDS Deducted Under Section 194H?
The tax is deducted at 5%. However, it’s only applicable if the amount paid exceeds certain limits.
Is There a Threshold for TDS Deduction?
Yes, TDS deduction under Section 194H is not required if the total commission or brokerage paid does not exceed ₹15,000 in a financial year.
Who Should Deduct TDS Under Section 194H?
- Individuals and HUFs (Hindu Undivided Families): This applies if your business turnover exceeds ₹1 crore or your professional receipts are over ₹50 lakh in the previous year.
- Others: Companies, partnership firms, Body of Individuals (BOI), Association of Persons (AOP), etc., must also comply with these TDS provisions.
How to Ensure Compliance?
- Determine Applicability: First, see if your payments fall under the criteria mentioned above.
- Calculate the Amount: If the commission or brokerage exceeds ₹15,000, calculate 5% of the amount to be deducted.
- Deduct and Deposit: The next step is to deduct the calculated TDS and deposit it with the government.
- File Returns: Lastly, file your TDS returns with the details of the deduction and the party to whom the commission or brokerage was paid.
FAQs on TDS under Section 194H
Q1: If I pay multiple commissions below ₹15,000, do I still need to deduct TDS?
A1: TDS under Section 194H applies to the total amount of commission or brokerage paid during the financial year. If the aggregate amount exceeds ₹15,000, TDS should be deducted.
Q2: When should the deducted TDS be deposited?
A2: The TDS must be deposited by the 7th of the following month in which the deduction was made.
Understanding TDS on commission or brokerage is essential for all entities engaged in such transactions. Compliance with Section 194H ensures you’re on the right side of tax laws, avoiding any unnecessary penalties. Keep these guidelines handy to navigate your tax deductions correctly.