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When you associate with somebody for providing services and earn a brokerage or commission in return, did you knew you would have to mention the same while filing your Income Tax Returns? Those who are not familiar, must know that TDS on commission and brokerage also gets deducted under section 194H. Read on!
Section 194H is specifically dedicated to TDS deducted on Income earned through brokerage or commission by any person who is liable to pay to an Indian resident. hindu undivided family and individuals who were earlier covered under section 44AB also require to deduct TDS.
However, keep in mind that this section does not cover the insurance commission mentioned in section 194D.
Brokerage or commission comprises any payment receivable or received, indirectly or directly, by a person on behalf of somebody else for the rendered services (excluding professional services). It also includes any service that is related to purchasing and selling of products. On top of that, transactions done in relation to valuable thing or article and any asset (except for securities) also get covered under this section.
Also, deductions made on the following transactions don’t get covered under this section:
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TDS should be deducted at the time of such income getting credited to the account of the payee, irrespective of whether or not the account is in the name of the person to whom the payment is to be credited. Further, the payment should be made via any of the following methods:
The 194H TDS rate is counted as below:
Apart from the payment types mentioned above, the following payments also get exempted from the TDS deduction:
A: Section 194H covers the income tax deducted on any income earned by commission or brokerage by any person who is an Indian resident. Individuals under the Hindu Undivided Family covered under section 44AB are also liable to deduct the TDS.
A: The rate of TDS is calculated as
5%. It will be
3.75% for transactions carried out from March 14th, 2020, in March 31st, 2021.
A: Commission brokerage is inclusive of payment received or will be received by an individual acting on behalf of another individual. The payment may be received directly or indirectly.
A: TDS will be charged if the payment received exceeds Rs. 15,000. However, commission earned on insurance is not covered under TDS of section 194H.
A: No, there are no exceptions to the rule. The TDS will be charged at 5% or 3.75%, depending on the time when the transaction was made. You will be exempted from paying TDS if only your earning is below Rs. 15000.
A: Any individual who is a resident of India and is earning an income above Rs.15000, through commission or brokerage, is liable to pay this TDS. Similarly, individuals covered by the Hindu Undivided Family of Section 44AB of the Income Tax Act are also liable to pay the tax under section 194H.
A: You can apply for a tax deduction if the commission is a result of a franchise granted by the Bharat Sanchar Nigam Limited (BSNL) or the Mahanagar Telephone Nigam Limited (MTNL). You can also apply for a deduction if a bank guarantees the commission. You can apply for the deduction if you have already paid for cash management charges.
A: You can pay the tax online and offline modes.
A: Tax deducted from April to February must be deposited by May 7th. Tax deducted on March 15th must be deposited before April 30th.
A: Yes, you can deposit TDS return online by generating Form 16 and creating and validating an FVU File.
Earning a commission or brokerage does not seem to be a serious job. But, in the eyes of the government - it is liable to filing and TDS deductions under section 194H. So, the next time you get associated with someone and start working on the commission or brokerage Basis, don’t forget to remind them to file your TDS!