Any income that is made by the way of brokerage or commission is liable to deduct tax in the form of Tax Deduction at Source (TDS) by a resident individual. All the individuals and HUFs( Hindu Undivided Family) under section 44AB are also liable to deduct Tax Deduction at Source(TDS). These entities should have annual income that is exceeding Rs. 25 Lakh and goes up to Rs. 1 crore. This section does not include the commission from insurance. The tax deduction at source under this section is charged at a flat rate of 5% inclusive of all services. Thus, no other surcharge or education cess is levied over TDS. The amount of tax deduction at source is to be deposited to the government prior to the due date of the payment made by the firm or individual. The two documents that are majorly required at the time of tax deduction at source are PAN and TAN of both the entities involved.
To understand the section 194H, you have to understand the basics of commission and brokerage. Any payment that is received or receivable, directly or indirectly by any person acting on behalf of another person is said to be commission or brokerage. This even includes any transaction done for valuable assets or articles.
Tax deduction at source on brokerage or commission includes various services. These are as follows:
There are few exceptions of these sort of commissions or brokerage on which no tax deduction at source is done under this section. They are:
Whenever there is a credit of incomes related to brokerage or commission to the account of the payee or any other account tax deduction at source will be done under the section of 194H of income tax act 1961. Even if these incomes are accounted in suspense account or by other name at the time of payment that is made in cash or by cheque or draft, tax deduction at source (TDS) is done under section 194H.
The rate of tax deduction at source is fixed at the rate of 5% in income tax act. No other charge as surcharge or education cess shall be added with the above rates. If in case the PAN is not quoted by the deductee, the rate of tax deduction at source (TDS) will be charged at 20%.
There are various conditions in which the Tax deduction at source is not applicable under section 194H. They are:
The tax amount that is deducted in the month of April to February is to be deposited before the 7th of the next month. For the month of March, it is to be deposited by 30th of april.Example:
As discussed above the deductee can apply for a lower rate or NIL rate of TDS to the assessing officer. For this various actions are to be taken by the assessing officer.
After validating with all these actions,the assessing officer can agree to the application of the deductee.
Some of the details that are required to be given at the time of filing this application of lower or NIL rate of Tax Deduction at Source are:
Few cases are there in which the Tax Deduction at Source(TDS) is exempted under section 194H. They are:
You can sum up that if you earn any income from brokerage or commission, you are liable to pay tax deduction at source(TDS) under the Income Tax Act ,1961. All the provisions regarding this Tax Deduction at Source (TDS) is made under section 194H. However there are few exceptions of commission or brokerage such as commission on Insurance sales and so on that are exempted from TDS under section 194H. Under this the tax is deducted at the time of payment of commission or brokerage is done.
Ans- The individuals who earn income from any sort of commission or brokerage are liable to deduct tax at source
Ans- The rate at which the tax is deducted at source is 5%. However, if the details of PAN is not given, this rate increased to 20%.
Ans- TDS is deducted at the time of payment of any commission is made in cash, by cheque or draft as applicable.
Ans- TDS limit on Commission and brokerage(Section 194H) for F.Y. 2018-19 is Rs. 15000/-
Ans- Ans.Interest @1.5% per month or part of a month on the amount of TDS is leviable from the date of tax was deductible till the date of tax actually deducted.
Ans- TDS @ 10% is required to be deducted if the Total Rent to be paid exceeds Rs. 1,80,000.If it is not deducted interest @1% per month or part of month is leviable on the amount of TDS is leviable from the date on which tax was deducted till date on which tax is actually paid.
Ans- ITR-4 is required to be filed if the commission income is the main source of your income.
Ans- And If the commision income is more than salary income than ITR4 is required to be filed otherwise ITR-1 can be filed and commission income can be shown under other sources.
Ans- Ans If the amount of commission is small then fill ITR-1 and if the amount of commission is Substantial then go for ITR-4.
Ans- Yes all expenses against commission income is deductible while filing your income tax return.
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