{"id":7471,"date":"2025-07-07T10:04:46","date_gmt":"2025-07-07T10:04:46","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/?post_type=glossary&#038;p=7471"},"modified":"2025-07-07T10:05:02","modified_gmt":"2025-07-07T10:05:02","slug":"section-194h-of-income-tax-act","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/section-194h-of-income-tax-act\/","title":{"rendered":"Section 194H of Income Tax Act"},"content":{"rendered":"<p>Section 194H deals with <strong><a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/tds\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>TDS<\/a> (<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/tax\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>Tax<\/a> Deducted at Source)<\/strong> on payments made as <strong>commission or <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/broker\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>broker<\/a>age<\/strong>. It applies when a person or company pays commission to someone for helping with a business deal or service.<\/p>\n\n\n\n<h3 id=\"what-is-commission-or-brokerage\" class=\"wp-block-heading\">What Is Commission or Brokerage?<\/h3>\n\n\n\n<p>Commission or brokerage is <strong>a fee paid to someone who helps make a deal happen<\/strong>. This could be for selling a product, referring a service, or helping in any business transaction.<\/p>\n\n\n\n<p><strong>Example:<\/strong><br>If a company pays &#x20B9;10,000 to a marketing agent for every customer they bring, that &#x20B9;10,000 is called <strong>commission<\/strong>.<\/p>\n\n\n\n<h3 id=\"what-does-section-194h-say\" class=\"wp-block-heading\">What Does Section 194H Say?<\/h3>\n\n\n\n<p>Section 194H says that if a business or person pays <strong>commission or brokerage<\/strong> over a certain amount, they must <strong>deduct TDS<\/strong> before making the payment.<\/p>\n\n\n\n<p>In simple terms:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If you pay someone commission,<\/li>\n\n\n\n<li>And the amount is more than &#x20B9;15,000 in a year,<\/li>\n\n\n\n<li>You must cut some tax (TDS) and pay the rest.<\/li>\n<\/ul>\n\n\n\n<h3 id=\"key-points-of-section-194h\" class=\"wp-block-heading\">Key Points of Section 194H<\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table><thead><tr><th>Feature<\/th><th>Details<\/th><\/tr><\/thead><tbody><tr><td><strong>Applies to<\/strong><\/td><td>Commission or brokerage payments<\/td><\/tr><tr><td><strong>TDS Rate<\/strong><\/td><td>5% (if PAN is provided)<\/td><\/tr><tr><td><strong>Threshold Limit<\/strong><\/td><td>&#x20B9;15,000 in a financial year<\/td><\/tr><tr><td><strong>When to Deduct TDS<\/strong><\/td><td>At the time of credit or payment<\/td><\/tr><tr><td><strong>Who Must Deduct TDS<\/strong><\/td><td>Companies, firms, and individuals with business turnover above &#x20B9;1 crore or professional income above &#x20B9;50 lakh<\/td><\/tr><tr><td><strong>No TDS Required If<\/strong><\/td><td>Amount paid is &#x20B9;15,000 or less in a year<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 id=\"what-is-included-under-commission-and-brokerage\" class=\"wp-block-heading\">What Is Included Under Commission and Brokerage?<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Commission for selling goods or services<\/li>\n\n\n\n<li>Referral fees<\/li>\n\n\n\n<li>Brokerage on property deals<\/li>\n\n\n\n<li>Fees for connecting buyers and sellers<\/li>\n<\/ul>\n\n\n\n<p>But it <strong>does not<\/strong> include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Insurance commission (covered under Section 194D)<\/li>\n\n\n\n<li>Salary (covered under Section 192)<\/li>\n<\/ul>\n\n\n\n<h3 id=\"tds-calculation-under-section-194h\" class=\"wp-block-heading\">TDS Calculation Under Section 194H<\/h3>\n\n\n\n<p>Let&#x2019;s look at a simple example:<\/p>\n\n\n\n<h4 id=\"example-1\" class=\"wp-block-heading\">Example 1:<\/h4>\n\n\n\n<p>A company pays &#x20B9;25,000 commission to a marketing agent.<\/p>\n\n\n\n<p><strong>TDS Deducted = 5% of &#x20B9;25,000 = &#x20B9;1,250<\/strong><br>So, the company pays &#x20B9;23,750 to the agent and deposits &#x20B9;1,250 to the government.<\/p>\n\n\n\n<h4 id=\"example-2\" class=\"wp-block-heading\">Example 2:<\/h4>\n\n\n\n<p>If total commission paid in a year is &#x20B9;12,000 &#x2014;<br><strong>No TDS is required<\/strong>, as it is below &#x20B9;15,000.<\/p>\n\n\n\n<h3 id=\"what-if-pan-is-not-provided\" class=\"wp-block-heading\">What If PAN Is Not Provided?<\/h3>\n\n\n\n<p>If the person receiving commission <strong>does not give their PAN<\/strong>, TDS is deducted at <strong>20%<\/strong> instead of 5%.<\/p>\n\n\n\n<h3 id=\"when-to-deposit-tds\" class=\"wp-block-heading\">When to Deposit TDS?<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>TDS should be deposited with the government <strong>by the 7th of the next month<\/strong>.<\/li>\n\n\n\n<li><a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/tds-return\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">TDS return<\/a>s must be filed quarterly (<a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/form-26q\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Form 26Q<\/a>).<\/li>\n<\/ul>\n\n\n\n<h3 id=\"who-should-not-worry-about-section-194h\" class=\"wp-block-heading\">Who Should NOT Worry About Section 194H?<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If you&#x2019;re an individual or HUF <strong>not running a business or profession<\/strong>, this section doesn&#x2019;t apply.<\/li>\n\n\n\n<li>If you pay small commissions under &#x20B9;15,000, no TDS is needed.<\/li>\n<\/ul>\n\n\n\n<h3 id=\"quick-tip\" class=\"wp-block-heading\">Quick Tip<\/h3>\n\n\n\n<p>If you&#x2019;re earning commission income, <strong>check your <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/form-26as\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Form 26AS<\/a><\/strong> to see if TDS has been deducted. You can claim it while filing your <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/income-tax\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">income tax<\/a> return.<\/p>\n\n\n\n<h3 id=\"summary-table\" class=\"wp-block-heading\">Summary Table<\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table><thead><tr><th>Situation<\/th><th>TDS Deducted?<\/th><\/tr><\/thead><tbody><tr><td>Commission paid = &#x20B9;10,000<\/td><td>&#x274C; No TDS<\/td><\/tr><tr><td>Commission paid = &#x20B9;20,000<\/td><td>&#x2705; Yes, at 5%<\/td><\/tr><tr><td>Receiver has no PAN<\/td><td>&#x2705; Yes, at 20%<\/td><\/tr><tr><td>Payment to employee as salary<\/td><td>&#x274C; Not under 194H<\/td><\/tr><tr><td>Payment of insurance commission<\/td><td>&#x274C; Covered under 194D<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 id=\"final-words\" class=\"wp-block-heading\">Final Words<\/h3>\n\n\n\n<p>Section 194H helps the government collect tax in advance from people who earn through commissions and brokerage. It ensures that <strong>income is tracked and taxed properly<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Section 194H deals with TDS (Tax Deducted at Source) on payments made as commission or brokerage. It applies when a person or company pays commission to someone for helping with a business deal or service. What Is Commission or Brokerage? Commission or brokerage is a fee paid to someone who helps make a deal happen. [&#x2026;]<\/p>\n","protected":false},"author":9,"featured_media":0,"menu_order":0,"template":"","meta":{"footnotes":""},"class_list":["post-7471","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/7471","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/9"}],"version-history":[{"count":2,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/7471\/revisions"}],"predecessor-version":[{"id":7474,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/7471\/revisions\/7474"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=7471"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}