Section 194H of the Income Tax Act is a provision that deals with the deduction of tax at source (TDS) on commission or brokerage payments. The section applies to any person who pays commission or brokerage to a resident person and specifies the rate at which TDS is to be deducted and the procedures for filing returns and obtaining refunds.
The section applies to a wide range of businesses and individuals who make payments to others for sales or other services. This includes payment of commission or brokerage to agents, brokers, dealers, or other intermediaries who are involved in the sale or purchase of goods or services.
Section 194H of the Income Tax Act, of 1961, deals with the deduction of tax at source (TDS) on commission or brokerage payments. The section applies to any person who pays commission or brokerage to a resident person and specifies the rate at which TDS is to be deducted and the procedures for filing returns and obtaining refunds.
Applicability of Section 194H
The section applies to a wide range of businesses and individuals who make payments to others for sales or other services. This includes payment of commission or brokerage to agents, brokers, dealers, or other intermediaries who are involved in the sale or purchase of goods or services.
Rate of TDS under Section 194H
The rate of TDS under Section 194H is 5% of the total amount of commission or brokerage paid, provided that the payment exceeds Rs. 15,000 in a financial year. If the payment is less than Rs. 15,000, no TDS is required to be deducted. The TDS deducted under this section must be deposited to the government within a specified time frame.
Procedure for TDS Deduction and Deposit
The payer must deduct TDS at the rate of 5% on the total amount of commission or brokerage paid if the payment exceeds Rs. 15,000 in a financial year. The TDS deducted must be deposited with the government within the prescribed time frame.
The TDS deducted and deposited must be reflected in Form 26AS of the deductee, which can be accessed online. This helps the deductee to claim the TDS credit while filing their income tax return.
Quarterly Filing of Return in Form 26Q
In addition to the TDS deduction and deposit, the payer must also file a quarterly return in Form 26Q with the Income Tax Department, providing details of the commission or brokerage paid and the TDS deducted. The due date for filing the return is 31st July, 31st October, 31st January, and 31st May of the financial year.
Penalties for Non-Compliance
Failure to deduct TDS or deposit the same with the government can attract a penalty equal to the amount of TDS not deducted or deposited, along with interest at the rate of 1.5% per month or part of a month from the date on which TDS was required to be deducted until the date of actual deposit.
Failure to file the quarterly return within the prescribed time limit can also attract penalties and interest.
Exemption from TDS under Section 194H
One important point to note is that the provisions of Section 194H do not apply to payments made to non-residents. In such cases, TDS is deducted under Section 195 of the Income Tax Act at the rate specified in the Double Taxation Avoidance Agreement (DTAA) between India and the country of residence of the non-resident.
Final Conclusion
In conclusion, Section 194H is an important provision of the Income Tax Act that aims to ensure the timely collection of taxes on commission and brokerage payments. As a payer, it is important to be aware of the provisions of the section and to comply with the TDS deduction and filing requirements to avoid any penalties or interest.
Read more useful content:
FAQs on Section 194H of the Income Tax Act:
Q. Who is liable to deduct TDS under Section 194H?
Ans: Any person who pays commission or brokerage to a resident person for sales or other services is liable to deduct TDS under Section 194H.
Q. What is the rate of TDS under Section 194H?
Ans: The rate of TDS under Section 194H is 5% of the total amount of commission or brokerage paid, provided that the payment exceeds Rs. 15,000 in a financial year.
Q. Is TDS required to be deducted if the payment is less than Rs. 15,000?
Ans: No, TDS is not required to be deducted if the payment is less than Rs. 15,000 in a financial year.
Q. What is the due date for depositing TDS deducted under Section 194H?
Ans: The TDS deducted under Section 194H must be deposited with the government within a specified time frame. The due date for depositing TDS is the 7th of the month following the month in which the TDS was deducted.
Q. What is the due date for filing the quarterly return in Form 26Q?
Ans: The due date for filing the quarterly return in Form 26Q is 31st July, 31st October, 31st January, and 31st May of the financial year.
Q. Are there any exemptions from TDS under Section 194H?
Ans: No, there are no exemptions from TDS under Section 194H, except for payments made to non-residents. In such cases, TDS is deducted under Section 195 of the Income Tax Act at the rate specified in the DTAA between India and the country of residence of the non-resident.
Q. What are the penalties for non-compliance with the provisions of Section 194H?
Ans: Failure to deduct TDS or deposit the same with the government can attract a penalty equal to the amount of TDS not deducted or deposited, along with interest at the rate of 1.5% per month or part of a month from the date on which TDS was required to be deducted until the date of actual deposit. Failure to file the quarterly return within the prescribed time limit can also attract penalties and interest.
Q. Can the deductee claim TDS credit for TDS deducted under Section 194H?
Ans: Yes, the deductee can claim TDS credit for TDS deducted under Section 194H while filing their income tax return, provided that the TDS deducted is reflected in their Form 26AS.
