2% on commission + brokerage (reduced from 5% in Oct 2024). ₹15K threshold. Sales commission, real estate brokers, distributors. Insurance agents under 194D.
SECTION 194H (commission/brokerage): (1) RATE: 2% (REDUCED from 5% effective Oct 2024). (2) THRESHOLD: ₹15,000 per FY. (3) NO PAN: 20%. APPLIES TO: (1) Sales commission. (2) Brokerage. (3) Real estate agent commission. (4) Distributor commission. NOT: (1) Insurance commission (separate Section 194D). (2) Bank commission. (3) Professional fees (194J). EXAMPLE: ₹1L sales commission. (a) TDS 2% = ₹2K. (b) Net ₹98K. (c) Agent claims credit.
COMMISSION TDS SECTIONS: (1) 194H: general commission + brokerage. 2%. (2) 194D: INSURANCE commission (agents). 2% (residents, reduced 2024) / 5% earlier. (3) 194G: lottery ticket commission. 2%. (4) 194M: commission by individuals/HUF (not in business) over ₹50L. 2%. KEY: insurance agents under 194D, general commission under 194H. Both 2% now. STRATEGIC: classify correctly — insurance vs general commission.
REAL ESTATE BROKERAGE 194H: (1) Property deal commission to broker: 2% TDS. (2) THRESHOLD ₹15K. (3) DEDUCTOR: buyer/seller paying broker (if business) or 194M (if individual over ₹50L). (4) Broker provides PAN. (5) Claims TDS credit. EXAMPLE: ₹5L brokerage on property deal. (a) TDS 2% = ₹10K. (b) Net ₹4.9L. (c) Broker reports as business income. STRATEGIC: real estate brokers track 194H TDS for ITR credit + GST (18% on brokerage).
194H DEDUCTOR COMPLIANCE: (1) TAN registration. (2) DEDUCT 2% at payment/credit. (3) DEPOSIT by 7th of next month. (4) FILE quarterly Form 26Q. (5) ISSUE Form 16A. (6) LATE: 1% + 1.5% per month interest + Section 234E ₹200/day. (7) DISALLOWANCE Section 40(a)(ia) if not deducted. STRATEGIC: businesses paying commission must comply. Track ₹15K threshold per payee. Distributor + dealer networks: significant 194H volume.
194H STRATEGY: AGENTS/BROKERS: (1) Provide PAN (avoid 20%). (2) Claim 2% TDS credit in ITR. (3) Presumptive 44AD if eligible. (4) GST registration if over ₹20L (18% on commission). (5) Lower TDS (Section 197) if income low. DEDUCTORS: (1) TAN + timely 2% deduction. (2) ₹15K threshold tracking. (3) Quarterly Form 26Q. (4) Form 16A to agents. (5) Avoid Section 40(a)(ia) disallowance. STRATEGIC: 2% rate (down from 5%) eases cash flow for agents. Distributor networks reconcile TDS. CONSULT CA for commission-heavy businesses.