{"id":34460,"date":"2021-08-16T12:00:40","date_gmt":"2021-08-16T06:30:40","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=34460"},"modified":"2025-02-19T18:26:23","modified_gmt":"2025-02-19T12:56:23","slug":"applicability-of-tds-on-commission-and-brokerage","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/","title":{"rendered":"Know the Applicability of TDS on Commission and Brokerage"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Section 194H discusses the implication of taxes on income generated via commission or brokerage by any individual accountable for paying a resident. Individuals &amp; HUF who come under the ambit of Section 44BB is also liable to deduct TDS. From the financial year 2020-21, individual and Hindu undivided families whose annual revenue of the business is more than Rs 1 crore or gross receipt from professional chores are above Rs 50 lakhs are liable for TDS deduction. Section 194H does not encompass insurance commission as mentioned in section 194D. The write-up will briefly explain the applicability of TDS on commission &amp; brokerage.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/#What_is_TDS\" >What is TDS?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/#When_is_a_taxpayer_liable_to_deduct_TDS_as_per_Section_194H\" >When is a taxpayer liable to deduct TDS as per Section\n194H?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/#Commission_and_Brokerage_us_194H\" >Commission and Brokerage u\/s 194H<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/#An_outlook_TDS_rate\" >An outlook TDS rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/#Which_scenarios_negate_the_possibility_of_TDS_us_194H\" >Which scenarios negate the possibility of TDS u\/s 194H?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/#What_is_the_Standard_Timeline_for_Depositing_TDS\" >What is the Standard Timeline for Depositing TDS?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/#TDS_at_a_lower_rate\" >TDS at a lower rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/#Procedure_to_authenticate_the_certificate_under_section_197_IT_Act\" >Procedure to authenticate the certificate under section\n197 IT Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-tds-on-commission-and-brokerage\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_TDS\"><\/span>What is TDS?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Tax deduction at source, widely known as TDS, is a means of accumulating tax on income, dividends, or asset sales by mandating the deductor to deduct tax due before paying the balance amount to the deductee (any the tax to the revenue authority). The Central Board for Direct Taxes (CBDT) is the one who regulates it. It has a great significance while conducting tax auditing. Assessee is also mandated to file a return to CBDT on a quarterly basis. Returns reflect the TDS deducted and routed to the government during the quarter to which it refers. As per the prevailing Act, the rate of TDS on commission and brokerage has been capped at 5%.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/how-to-file-tds-return-online\/\">How to File TDS Return Online? <\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"When_is_a_taxpayer_liable_to_deduct_TDS_as_per_Section_194H\"><\/span>When is a taxpayer liable to deduct TDS as per Section\n194H?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>TDS\ndeduction under Section 194H will be made at the time of credit of income into\nthe payee\u2019s account or to any other account.<\/p>\n\n\n\n<p>Whether recognized as suspense\naccount or by any other name during payment, of such income in cash or by the\nissuance of the cheque or draft or via any other mode, whichever is\nearlier.&nbsp; <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Commission_and_Brokerage_us_194H\"><\/span>Commission and Brokerage u\/s 194H<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>TDS on commission or brokerage refers to any payment<\/p>\n\n\n\n<ul>\n<li>received or receivable,<\/li>\n\n\n\n<li>directly or indirectly, OR<\/li>\n\n\n\n<li>By an individual representing another person<\/li>\n<\/ul>\n\n\n\n<p>TDS\nimposed on commission&nbsp;<strong>brokerage includes, <\/strong><\/p>\n\n\n\n<p><strong>For\nservices facilitated (excluding professional services), or&nbsp;<\/strong><\/p>\n\n\n\n<ul>\n<li>For any services related to the trading of goods or<\/li>\n\n\n\n<li>In connection with any transaction related to the valuable article, asset, or thing, except securities<\/li>\n\n\n\n<li>Exceptions to brokerage\/commission<\/li>\n\n\n\n<li>There is a general misconception among the taxpayers that Presumptive Taxation is levied on income generated via commission.&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"An_outlook_TDS_rate\"><\/span>An outlook TDS rate<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As\nmentioned earlier, the government has mandated the imposition of 5% of TDS on\ncommission and brokerage. However, in the Covid era from May 2020 until March\n31 2021, this rate was slashed down to 3.75%, with no inclusion of surcharge,\neducation cess or SHEC. Presently, the authority has mandated the TDS deduction\nat a standard rate. In the absence of the PAN, the deduction rate will go up to\n20%.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Which_scenarios_negate_the_possibility_of_TDS_us_194H\"><\/span>Which scenarios negate the possibility of TDS u\/s 194H?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>No\ndeduction shall be done under the aforesaid section in an event where the\namount or the total amount of such income to be paid or carried during the\nfinancial year does not surpass Rs 15,000.<\/p>\n\n\n\n<p>An individual can make an application to the assessing officer u\/s 197 for deduction of tax at a reduced rate or NIL rate.<\/p>\n\n\n\n<div class=\"shadow1\"><strong>Key takeaway:<\/strong> The payee is legally accountable to deposit the TDS with the IT department. After successful submission of the TDS amount, the TRACES website append the same on the Form 26AS of individual deductees. This portal is in direct connection with the IT department\u2019s e-filing portal.<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Standard_Timeline_for_Depositing_TDS\"><\/span>What is the Standard Timeline for Depositing TDS?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Tax deducted during the month of April to <strong><em>February<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/February\"><strong><em>[1]<\/em><\/strong><\/a><\/sup> will be deposited on or before the 7th of the subsequent month. Tax deducted in March is to be deposited on or before April 30.<\/p>\n\n\n\n<p>For\nexample, the TDS deduction done on April 25 is to be deposited with the\nconcerned authority on or before May 7. Tax deducted on March 15 should find\nits way to the government\u2019s account on or before April 30.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"TDS_at_a_lower_rate\"><\/span>TDS at a lower rate<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\npayee (the individual whose tax is deducted) can make a formal request via\nprescribed form before the assessing officer u\/s 197 for the tax deduction at\nNIL rates or at a lower rate.<\/p>\n\n\n\n<ul>\n<li>Authenticate the deductee\u2019s PAN submitting certificate under section 197<\/li>\n\n\n\n<li>The certificate should enclose valid PAN details, Rate, Section, and relevant financial year.<\/li>\n\n\n\n<li>Check that the threshold limit for the said certificate has not been surpassed in the preceding quarters.<\/li>\n\n\n\n<li>Make sure to append a legit certificate number in the statement.<\/li>\n<\/ul>\n\n\n\n<p>The payee concerned may seek certification for lower or NIL TDS deduction on their Form No 13. Upon receiving the certificate, the payee can submit it to the deductor to deduct the TDS at a lower or Nil rate. Deductor has to furnish this certificate detail while <a href=\"https:\/\/corpbiz.io\/tds-return-filing\" title=\"TDS Return Filing\"><strong>filing TDS return<\/strong><\/a> &amp; has to authenticate before filing. 197 certificate ought to be a 10-digit alphanumeric number.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_to_authenticate_the_certificate_under_section_197_IT_Act\"><\/span>Procedure to authenticate the certificate under section\n197 IT Act<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li>Step 1: Head over to the TRACES portal and log in to the same. The new user needs to create their account through a basic verification process.<\/li>\n\n\n\n<li>Step 2: Once you get access of the home page, tap on the \u201cStatements\/Payments\u201d and then opt for \u201c197 Certificate Validation\u201d.<\/li>\n\n\n\n<li>Step 3: Enter 10-digit certification no, Payee\u2019s PAN &amp; select \u201cFinancial      Year\u201d.<\/li>\n<\/ul>\n\n\n\n<p>It\nwill manifest all the details such as certification no, financial year, TDS\nrate, Valid&nbsp;<\/p>\n\n\n\n<ul>\n<li>period, section code, amount consumed etc.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 194H revolves around the applicability of TDS on commission &amp; brokerage. However, it should be noted that this section does not take the trading of securities and professional services into account. Further, this section mandates taxpayers earning more than the threshold limit cited under clause (a) or clause (b) of section 44AB during the FY promptly preceding the FY in which such commission or brokerage is credited or paid to deduct tax.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/benefits-of-tds-return-filing-in-india\/\">All about Benefits of TDS Return Filing in India <\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Section 194H discusses the implication of taxes on income generated via commission or brokerage by any individual accountable for paying a resident. Individuals &amp; HUF who come under the ambit of Section 44BB is also liable to deduct TDS. From the financial year 2020-21, individual and Hindu undivided families whose annual revenue of the business [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":34484,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[237],"tags":[1918],"acf":{"service_id":"90"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":5986,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/34460"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=34460"}],"version-history":[{"count":33,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/34460\/revisions"}],"predecessor-version":[{"id":68805,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/34460\/revisions\/68805"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/34484"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=34460"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=34460"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=34460"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}