TDS on Commission for AY 2017-18 / FY 2016-17

TDS (Tax collected at Source) is a method to collect income tax on the origin / source of income. TDS is used by Indian government to ensure that tax is being paid by people as they earn instead of end of year. TDS also makes it difficult for people/businesses to hide their income and associated tax. AY 2017-18 (FY 2016-17) refers to the period starting on Apr 1, 2016 and ending on Mar 31, 2017.

As per income tax rules, TDS on Commission / Brokerage need to be deducted whenever a payment is made by way of commission or brokerage. This article explains the TDS on commission for AY 2017-18.

TDS on Commission / Brokerage for AY 2017-18 (FY 2016-17)

As per budget 2016, TDS on income through commission / brokerage has been set to 5% for AY 2016-17 (FY 2016-17). Before that, it used to be 10%.

Basically, under section 194H of income tax, if a payment is being made by way of commission or brokerage, TDS @ 5% need to deducted at the time of payment or credit.

TDS on Commission / Brokerage - Section 194H

TDS on commission need to be deducted by all persons except Individuals and HUFs. Though if an individual / HUF is liable to audit under section 44AB, then they also need to deduct TDS while paying for commission or brokerage.

Threshold Limit - Though there is a threshold limit as per section 194H. That is, TDS need to be deducted only if the commission / brokerage paid during the year is above the threshold limit. These limits are

• Before 1-6-2016 - Rs 5000
• Before 1-6-2016 - Re 15000

Section 194H

Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent [w.e.f 01.06.2016 @5% as per Finance Act 2016]

Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed five thousand rupees [ w.e.f 01.06.2016 Rs 15000 as per Finance act 2016]

Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section.

Provided also that no deduction shall be made under this section on any commission or brokerage payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office franchisees.