Section 194H – TDS on Commission or Brokerage | Meaning, Rate & Due Dates

What is Section 194H of the Income Tax Act?

Section 194H of income tax act deals with TDS levied on the earning received as commission or brokerage. This commission is the amount paid to an entity for rendering services during a sale or purchase.

In simple terms it deals with taxes that are imposed on the earnings generated through commission or brokerage. It mandates tax deduction by the person (other than individual or HUF) reponsible for paying commission or brokerage to resident persons. This section 194H shall also be deducted by all individuals and HUF who are required to get their accounts audited under section 44AB.

Meaning of commission or Brokerage

Commission or Brokerage includes any payments received or receivable directly or indirectly by a person acting on behalf of another person. 

• For services rendered 
• For any services in the course of buying or selling of goods 
• In relation to any transaction relating to any asset, valuable article or thing other than securities.

Commission and Brokerage includes Services rendered except professional services, services in the course of buying or selling goods and any transaction done for valuable assets or articles.

Section	Nature of payment	Threshold Limit	Payer	Payee	Rate	Time of Deduction
194H	Commission (other than insurance commission or brokerage)	15,000 (20,000 from F.Y 2025-26)	Any person (other than an individual or HUF whose total sales, gross receipts or turnover from the business or profession does not exceed 1 crore in case of business and 50 lakhs in case of profession during the immediately preceding F.Y.) responsible for paying commission or brokerage	Any resident	5% (till 3oth Sep 2024) & 2% (w.e.f. 1st October 2024)	At the time of credit of such income to the account of the payee or at the time of payment, whichever is earlier.

Any person (not being individual or HUF) under section 2(31) – individual, HUF, company, firm, AOP or BOI whether incorporated or not, Local authority, every artificial judicial person. For instance, Payer for Mr. X for responsible for paying for any income by way of commission under section 194D insurance commission or brokerage.

Payee for Mr. Y resident which includes any payment received or receivable directly or indirectly by a person acting on behalf of another person for services rendered for professional services for service rendered by a person in the course of carrying on a legal, medical, engineering, accountancy profession etc.

Time of Deduction

Whenever there is a credit of income related to brokerage or commission to the account of the payee or any other account, even if these are accounted in suspense accounts or by another name at the time of payment that is made in cash or by cheque or draft, tax deduction at source (TDS) is done under section 194H.

Deposit of TDS

Tax deducted by an office of government 

• Without an income tax challan – deposit on the same day
• With an income tax challan – deposit within 7 days from the end of the moth in which the deduction is made

Other deductors

• If credited or paid in March – 30th April
• Any other month within 7 days from the end of the month in which the deduction is made.

Related Income Tax Rule 

Rule 28: Application for grant of certificate for deduction of income tax at any lower rates or No deduction of Income tax. Undersection 197(1) form No 13 electronically through EVC or digital signature the responsibility of deductor validate PAN of deductee submitting 197 certificates.

• Certificate should be valid for PAN, Section, Rate and Relevant financial year,
• Verify that the threshold limit for the certificate has not been exceeded in previous quarters. Quote correct certificate number.

Quarterly Statement filing (rule 31A) & furnishing certificate of TDS (Rule 31)

• Payer must submit a quarterly statement (form 26Q) for tax deducted at source
• Payer must furnished certificate of TDS in from 16A within 15 days from the due date for furnishing TDS statement.

Quarterly	Due date fir statement Filing	Deadline for issuing Certificate
April – June	31st July	15th August
July – September	31st October	15th November
October – December	31st January	15th February
January – March	31st may	15th June

Shall at the time of 

• Credit of such income to the account of the payee or 
• At the time of payment of such income in – cash, cheque, draft or by any other mode.

Accounting of 194H of Commission

First Due Entry - 30^th September

Commission Charges A/c ……. Dr

Input CGST 9% A/c           …….. Dr

Input SGST 9% A/c           …….. Dr

Or

Input IGST 18% A/c          …….  Dr

     To TDS on Commission 194H (TDS Payable) A/c

     To Vendor A/c

 

Second Entry – 5^th October

Vendor A/c    …….. Dr

  To Bank A/c

 

Third Entry – 7^th October

TDS on Commission 194H (TDS Payable) A/c ….. Dr.

     To Bank A/c

 

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Sandeep Ghatuary

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