Tax Deducted at Source (TDS) – Part 3

194H: TDS from Commission or Brokerage other than insurance commission

Any person who pays any commission or brokerage is liable for Tds u/s 194h since commission or brokerage serves as a source of income but specially excluded insurance commission which tds deducted u/s 194d.

Commission or brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services (professional services specially excluded which tds deducted u/s 194J) for example commission for buying/selling of goods, commission or brokerage to any transaction relating to any asset, valuable article or thing
except securities are cover under this section.

There is element of agency is important, trade discount is different from commission (generally trade discount is based on quantity purchased), agent-principal relation is also important for commission/brokerage.

Threshold limit: exceed 15000 during financial year.

Rate of Tds: 5% (3.75% from 14th may 2020 to 31st march 2021)

TDS will liable to deducted in such month credited in whatever name or paid whichever is earlier.

194I: TDS on Rent

It covers person paying rent for land, building, plant & machinery, furniture & fittings etc and he is responsible for tds u/s 194I

Tds threshold limit is 240000.

Rent of plant, equipment, and machinery: 2%

Rent of land, building, furniture, or fitting: 10%

Rent means any payment like lease, sub-lease, or any other agreement or arrangement, service charge or whatever named pay even whether owned by the payee or not (subletting is also cover)

There is no surcharge levied on the TDS on rent, except where there is the involvement of a foreign company and the payment is above 1 crore

Tds will liable to deduct in month when credited or paid in whatever form whichever is earlier (so advance rent is also liable to deduct but subject to financial year end remaining will liable to deduct in next financial year)

If Payee is NRI, then TDS @ 30%+surcharge+ cess must be deducted and there is no threshold limit for rent amount.
If payee is two or more co-owner, each having a definite and ascertainable share in property, the limit of the 240000 will apply to each of the co-owner separately

There is no Tds will deduct on GST or service tax part, tds will levy after reducing GST/service tax etc.

194J: Fees for professional or technical services

Professional fees are fees paid to lawyer, doctor, engineer, architect, chartered accountant, interior decorators, advertisers, film artist, company secretary, authorised representative, sportsperson, commentators, anchors, umpires, referees, physiotherapists, coaches, trainers, team physicians, sports columnists etc. Technical service would include the rendering of managerial, technical or consultancy services, royalty, remuneration to director exclude like sitting fees, non-compete fee, as per Supreme Court’s Judgement, technical service would include service provided by human, it would not have any service provided by machines or robots.

Threshold limit each professional service or technical service or royalty etc:30000 per annum it means even same person two different service provided than threshold limit for each service.

However, there is no such limit for payments (commission. Fees or remuneration) made to a director by the company. The tax will have to be deducted no matter how small the amount.

Rate of tax: payment of fees for technical service, payment made to operators of call centres, payment of royalty for sale, distribution, or exhibition of cinematographic films TDS @ 2%

All other payment like professional service tds @10%.

No TDS is required to be deducted while making payment for personal purpose, TDS will deduct only payment for business purpose

Modelling may be profession, but it neither defined as profession u/s 194J nor notified by CBDT so no Tds will deduct on payment to modelling.

194Q: TDS on payment to seller on certain payments

A buyer whose turnover or gross receipts or sale in immediately preceding financial year was more than 10 crores and such payment for purchase of goods of the value/aggregate of the value exceeding 50 lakhs, payment to resident seller.
Rate of TDS: tds @.1% on amount exceeding 50 lacs in a financial year, threshold limit for each seller-wise 50 lakhs.
GST will be excluded for calculation of turnover.

194R: TDS on benefit/perquisite payment to residents

Businesses, companies, or entities often extend multiple types of benefits and perquisites to their distributors, channel partners, agents, or dealers to incentivise and motivate them to promote further growth of a business-like travel packages, gift cards or vouchers, product under incentive schemes or usage of business assets, among others.

Example: A few companies claimed expenses for business promotions which allow expense u/s 37 of income tax act, 1961 but generally recipients do not report this in their income return because this incentive in kind not in cash. This leads to the furnishing of incorrect particulars of income now payer responsibility to deduct TDS on such payment for
benefit/perquisite u/s 194R so purpose of this section is to widen the tax base and plug any scope of tax evasion

Rate of TDS: 10%

Threshold limit is 20000 during financial year to one beneficiary

Section 194R does not apply to employees who receive benefits from their employers, section 192 will apply to them.

 

Author

CA Ankita Bothra