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A comprehensive guide to understanding TDS levied on commission and brokerage
The TDS rate under section 194H is 3.75% for transactions from 14 May 2020 until 31 March 2021.
Commission or brokerage includes any payment
TDS on commission or brokerage includes,
People are under the presumption that Presumptive Taxation is applicable to Income from the commission but technically it is not correct.
The rate of TDS is 5%. The rate is 3.75% for transactions from 14 May 2020 until 31 March 2021. No surcharge, education cess or SHEC shall be added to the above rates. Hence, the tax will be deducted at source at the basic rate. The rate of TDS will be 20% in all cases if PAN is NOT quoted by the deductee.
The deductee (the person whose tax is deducted) can make an application to the assessing officer under section 197 for deduction of tax at NIL rate or at a lower rate.
Whether TDS under Section 194H is applicable to tickets issued by airlines to its travel agents at a concessional price?
As per judgement in CIT v. Singapore Airlines Ltd., where the airlines issued tickets to their travel agents at a concessional price, it was held that the transaction between Airlines and travel agents was that of principal-to-principal, and the price difference was because of discount. Therefore, such a transaction would not fall within the ambit of section 194H.
Whether Section 194H is applicable to trade incentives to dealers?
Ans. In Tube Investments of India Ltd. v. ACIT, the taxpayer was a manufacturer of bicycles and was giving trade incentives to dealers. The tribunal held that if dealers were selling goods at the price they were purchasing from the company, such trade incentives would amount to a commission for section 194H.
Whether TDS under Section 194H is deductible on turnover commission payable by RBI to Agency Banks?
As per Circular: No. 6/2003, dated 3-9-2003, TDS under section 194H shall not be applicable on Turnover Commission payable by the RBI to the Agency Banks, i.e. Banks authorized for conducting Government business, for performing the Central and State Governments’ general banking business on behalf of RBI.
When should you deduct TDS (point of deduction) under Section 194H?
TDS under Section 194H shall be deducted at the time of credit of such income to the payee’s account or any account, called by any other name, or at the time of payment by any mode, whichever is earlier.
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