Understanding Section 194H: TDS on Commission and Brokerage Payments: Commission or brokerage payments, as outlined in Section 194H of the tax code, entail certain provisions for tax deduction at the source (TDS). Let’s break down the key points in simpler terms:
A. Who Pays and How Much?
– Any entity, excluding individuals or Hindu Undivided Families (HUFs), paying commission or brokerage to a resident is subject to TDS at a rate of 5%.
– However, TDS applies to individuals or HUFs only if their turnover exceeds Rs. 1 crore (for business) or Rs. 50 lakhs (for profession) in the previous financial year.
B. When is Tax Deducted?
– Tax is deducted either at the time the income is credited to the recipient’s account or at the time of actual payment, whichever comes first.
C. Threshold Limit: Rs. 15,000
– TDS is applicable if the commission or brokerage exceeds Rs. 15,000.
D. What Counts as Commission or Brokerage?
– This includes payments received for services rendered on behalf of another person, services related to buying or selling goods, or transactions involving assets, valuable articles, or things (excluding securities).
E. Exceptions to TDS under Section 194H
– Certain professional services, like legal, medical, engineering, or architectural services, are exempt from TDS.
– Payments by BSNL or MTNL to their PCO franchisees are also exempt from TDS.
Additionally, for payments within the advertising industry:
– Payments from clients to advertising agencies are subject to TDS under section 194C.
– However, payments from advertising agencies to media companies are not subject to TDS under section 194C.
– Payments made by television channels or publishing houses to advertising agencies for procuring advertisements are not subject to TDS under section 194H.
– The term “commission” in this context does not refer to payments for booking advertisements but rather to payments for engaging models, artists, photographers, etc.