Section 194H of Income Tax Act for AY 2023-24

Section 194H of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Commission or brokerage.

Amended and updated notes on section 194H of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to Commission or brokerage.

Chapter XVII (Sections 190 to 234G) of the Income Tax Act 1961 deals with the provisions related to collection and recovery of tax. Section 194H of IT Act 1961 provides for Commission or brokerage.

Recently, we have discussed in detail section 194G (Commission, etc., on the sale of lottery tickets) of IT Act 1961. Today, we learn the provisions of section 194H of Income-tax Act 1961. The amended provision of section 194H is effective for financial year 2022-23 relevant to the assessment year 2023-24.

In this article, you will learn detail of the provisions of section 194H of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962 as provided by Ministry of Law and Justice, Government of India.

Section-194H: Commission or brokerage

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 five per cent :

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 fifteen thousand rupees :

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 one crore rupees in case of business or fifty lakh rupees in case of profession 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:

[Second proviso of section 194H was amended w.e.f. 01.04.2020 by the Finance Act 2020]

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.

Explanation: For the purposes of this section,—

(i) “commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities;

(ii) the expression “professional services” means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44AA;

(iii) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ;

(iv) where any income is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.


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