Do you have to pay taxes for brokerages and commissions?
According to Section 194H of the Income Tax Act of India, you have to. This Act makes sure that those earning through unregulated means pay their fair share of income taxes.
Let’s find more about Section 194H in the following sections.
Section 194H contains guidelines about tax deductions on the amount paid as brokerage or commission. Entities making a payment as commission or brokerage to a resident have to make a tax deduction at a 5% rate.
This amount has to exceed Rs. 15,000 in one financial year, and individuals/HUFs are not responsible for deducting taxes. However, individuals and Hindu Undivided Families liable to tax audit under Section 44AB must make tax deductions under Section 194H. TAN and PAN of both the involved parties are necessary for 194H TDS deduction under this section.
To have a clear idea about Section 194H, you need to know what qualifies as a commission or brokerage. Commissions or brokerage is any amount that one receives or will receive directly or indirectly for acting on behalf of another person. This would also include payments made for valuable assets.
Tax deduction for commission or brokerages would include these services:
However, certain commissions and brokerage charges do not qualify for tax deduction under Section 194H. These include:
Also Read – Income Tax slabs
You can deduct tax under Section 194H when the amount gets credited to the account of a payee or some other account. Such payments are eligible for tax deduction even when paying commission in a suspense account.
If you are a deductee, you can apply to reduce the rate of tax deduction done on Section 194H. You need to make an application to an assessing officer to avail of tax deduction at a reduced rate. The assessing officer has to validate your PAN while you submit a certificate under Section 197.
In addition, the assessing officer will also need to verify that the threshold limit for the certificate does not exceed during any quarters. You will also need to quote the certificate accurately.
Once the assessing officer evaluates and validates all necessary information, they will approve the reduction of the TDS rate. You have to provide the following information while filing for a reduction in tax deduction rate:
If you are making a payment of more than Rs. 15,000 in one financial year towards commission or brokerage, you can make a tax deduction of 5%. There won’t be any additional deduction in the form of education cess or surcharge.
In case of the absence of a PAN card, the TDS can be a maximum of 20%.
Also read: https://navi.com/blog/income-tax-calculator/
If you earn money through commissions or brokerage, you must be aware of various aspects of Income Tax you are liable to pay. The above-mentioned sections will guide you through the aspects of TDS on commissions/brokerage.
TDS deduction under Section 194H is not applicable under the following circumstances:
>If the total brokerage or commission, the charge does not exceed Rs. 15,000 in a financial year
>Payment in terms of commission or brokerage charges to BSNL or MTNL for public call franchisees
>Commission paid by companies to its workers
>Income obtained from service tax payment
TDS deduction that takes place between April to February in a financial year has to be submitted either on or before the 7th of the next month. For tax deduction in March, the deposition should be done before April 30.
For instance, if you make a tax deduction on June 20, you have to deposit it on or before July 7.
If you do not deduct the necessary TDS under Section 194H, you have to pay an interest at 1% per month from the date at which TDS was to be actually deducted to the date of deduction.
Here are some of the important guidelines of Section 194H:
>Tax deduction will take place only at the government-approved rate
>Tax deducted has to be submitted to the government within the time limit
>You need to provide the TAN and PAN while depositing the tax
No, tax deduction does not take place on any service tax paid with the commission or brokerage charge. It is applicable only to the amount one pays in the form of commission.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
|Section 112A||Section 50||Section 245|
|Section 80QQB||Section 32AD||Section 250|
|Section 35D||Section 143 (1a)||Section 115BAB|
|Section 143||Section 79||Section 140A|
|Section 17(2)||Section 3||Section 94A|
|Section 147||Section 80||Section 40A|
|Section 48||Section 115AD||Section 14A|
|Section 45||Section 285BA||Section 6|
|Section 36||Section 87A||Section 80GGA|
|Section 244A||Section 234E||Section 28|
|Section 197||Sectio 548||Section 194J(1)(ba)|
|Section 145A||Section 80P||Section 92CD|
What is Form 26QB for TDS? How to Download and Submit it?While purchasing a property, buyers are liable to pay various taxes. The Finance Act, 2013 made TDS... Read More »
PF Withdrawal Rules 2023 – Rules, Documents Required and TypesEPF/PF Withdrawal Employees’ Provident Fund (abbreviated as EPF) is a popular retirement sav... Read More »
Stamp Duty and Property Registration Charges in Delhi 2023It is compulsory for property buyers in the Capital to pay stamp duty in Delhi during property regi... Read More »
Income Tax Return – Documents, Forms and How to File ITR Online AY 2023-24In India, it is mandatory for all taxpayers who earn more than the basic tax exemption limit to fil... Read More »
What is Section 80CCD – Deductions for National Pension Scheme and Atal Pension YojanaThe Income Tax Act provides a number of deductions and tax benefits to taxpayers, so they can strat... Read More »
Tax on Dividend Income: Sources, Tax Rate and TDS on dividend incomeWhat are Dividends? Companies may raise funds for running their operations by selling equity. Th... Read More »
Section 112A of Income Tax Act: Taxation on Long-Term Capital GainsWhat is Section 112A? Section 112A of the Income Tax Act was announced in Budget 2018 to replace... Read More »
Section 206AB of Income Tax Act: Eligibility And TDS RateSection 206AB was introduced in the Finance Bill 2021 as a new provision pertaining to higher deduc... Read More »
What is a Credit Note in GST – Example, Format and StepsA GST Credit Note is mandatory for any GST-registered supplier of goods or services. As a supplier,... Read More »
Exemptions and Deductions Under Section 10 of Income Tax ActWhat Is Section 10 of the Income Tax Act? Section 10 of the Income Tax Act, 1961 provides tax-sa... Read More »
Section 57 of the Income-tax Act – Income from Other SourcesIt is quite likely that many entities - individuals as well as businesses - have multiple sources o... Read More »