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Every individual working in the registered sector is required to pay taxes as per the income tax slab. In this part of our TDS series, we’ll touch on Section 194G and Section 194H – 2 important tax deduction provisions, which are as follows:
We bet you’ve thought of buying a lottery ticket and waiting for a chance to win at least once in your life. Lottery tickets are an attractive way for many people throughout India to try their luck.
But you will be surprised to know that the ticket seller (or agent) who sells lottery tickets must follow the tax deduction provisions. Wonder how? Let’s see how the provisions of Section 194G work.
As per Section 194G, any person who pays an income by way of commission, remuneration, or prize on a lottery ticket to a person who has been selling lottery tickets (also stocking, distributing, or purchasing) must deduct TDS.
The rate of tax deduction u/s 194G is 5%. And the time of deduction is whichever is earlier of, the credit of such income to the account of the payee (receiver) or actual payment (in cash, cheque, draft or other modes).
Also, no TDS is required to be deducted where the amount of such income does not exceed Rs.15000.
Whenever we hear “commission” or “brokerage,” the first thing that comes to mind is a salesman walking door-to-door and selling products. And this, in turn, helps him/her earn income through commission.
This thinking is right (although not entirely, but only to some extent) as commission or brokerage is not limited to a single dimension.
This simply means any payment (income) received or receivable by a person who is acting on behalf of another person for providing any services (like buying or selling goods; entering into transactions relating to any asset, valuable article, or thing excluding securities) is called ‘commission’ or ‘brokerage.’
Anyone (but not an individual or HUF) who is responsible for paying, to a resident, any income by way of commission or brokerage is required to deduct tax at source.
It is important to note that such a commission will not include the insurance commission which is liable to TDS u/s 194D.
Also, if an individual or HUF becomes liable to audit u/s 44AB (a) and (b), they must deduct tax u/s 194H.
The rate of tax deduction u/s 194H is 5%. And the time of deduction is earlier than the credit of income to the account of the payee (receiver) or actual payment (in cash, cheque, draft, or other modes).
If the total commission or brokerage paid in a financial year does not exceed ₹15,000, no TDS needs to be deducted. However, this exemption is applicable per financial year, per recipient. If the total payment exceeds ₹15,000 to a particular recipient, TDS will apply on the entire amount, not just the excess.
Section 194G of the Income Tax Act pertains to the TDS on commission, prize, or brokerage payments regarding sale of lottery tickets. It applies when a person pays a commission, prize, or brokerage exceeding ₹15,000 in a financial year.
The applicable rate of TDS under Section 194G is 5% (subject to change as per tax laws) on the commission, prize, or brokerage paid.
No, there are no exemptions available under Section 194G. TDS is applicable on all commission, prize, or brokerage payments exceeding ₹15,000 in a financial year.
Section 194H of the Income Tax Act relates to TDS on commission or brokerage payments. It applies when a person pays a commission or brokerage exceeding ₹15,000 in a financial year.
The applicable rate of TDS under Section 194H is 5% (subject to change as per tax laws) on the commission or brokerage paid.
No, there are no exemptions available under Section 194H. TDS applies to all commission or brokerage payments exceeding ₹15,000 in a financial year.
No, the threshold limit of ₹15,000 applies on a per-recipient basis. If the total commission, prize, or brokerage payment to a particular recipient exceeds ₹15,000 in a financial year, TDS will be applicable on the entire amount, not just the excess.
