Section 194H of Income Tax Act

Section 194H deals with TDS (Tax Deducted at Source) on payments made as commission or brokerage. It applies when a person or company pays commission to someone for helping with a business deal or service.

What Is Commission or Brokerage?

Commission or brokerage is a fee paid to someone who helps make a deal happen. This could be for selling a product, referring a service, or helping in any business transaction.

Example:
If a company pays ₹10,000 to a marketing agent for every customer they bring, that ₹10,000 is called commission.

What Does Section 194H Say?

Section 194H says that if a business or person pays commission or brokerage over a certain amount, they must deduct TDS before making the payment.

In simple terms:

• If you pay someone commission,
• And the amount is more than ₹15,000 in a year,
• You must cut some tax (TDS) and pay the rest.

Key Points of Section 194H

Feature	Details
Applies to	Commission or brokerage payments
TDS Rate	5% (if PAN is provided)
Threshold Limit	₹15,000 in a financial year
When to Deduct TDS	At the time of credit or payment
Who Must Deduct TDS	Companies, firms, and individuals with business turnover above ₹1 crore or professional income above ₹50 lakh
No TDS Required If	Amount paid is ₹15,000 or less in a year

What Is Included Under Commission and Brokerage?

• Commission for selling goods or services
• Referral fees
• Brokerage on property deals
• Fees for connecting buyers and sellers

But it does not include:

• Insurance commission (covered under Section 194D)
• Salary (covered under Section 192)

TDS Calculation Under Section 194H

Let’s look at a simple example:

Example 1:

A company pays ₹25,000 commission to a marketing agent.

TDS Deducted = 5% of ₹25,000 = ₹1,250
So, the company pays ₹23,750 to the agent and deposits ₹1,250 to the government.

Example 2:

If total commission paid in a year is ₹12,000 —
No TDS is required, as it is below ₹15,000.

What If PAN Is Not Provided?

If the person receiving commission does not give their PAN, TDS is deducted at 20% instead of 5%.

When to Deposit TDS?

• TDS should be deposited with the government by the 7th of the next month.
• TDS returns must be filed quarterly (Form 26Q).

Who Should NOT Worry About Section 194H?

• If you’re an individual or HUF not running a business or profession, this section doesn’t apply.
• If you pay small commissions under ₹15,000, no TDS is needed.

Quick Tip

If you’re earning commission income, check your Form 26AS to see if TDS has been deducted. You can claim it while filing your income tax return.

Summary Table

Situation	TDS Deducted?
Commission paid = ₹10,000	❌ No TDS
Commission paid = ₹20,000	✅ Yes, at 5%
Receiver has no PAN	✅ Yes, at 20%
Payment to employee as salary	❌ Not under 194H
Payment of insurance commission	❌ Covered under 194D

Final Words

Section 194H helps the government collect tax in advance from people who earn through commissions and brokerage. It ensures that income is tracked and taxed properly.