Section 194 H of Income Tax Act

When Is Section 194H TDS Deduction Applicable?

 Section 194H allows an authorised entity to deduct TDS on brokerage in the following circumstances:


  • The commission is credited to the resident payee’s

  • Payment of commission in any suspense account via cash, check, or
  • The tax deducted at source on the amount payable to the service provider is known as It is then transferred to the Indian Central Government. TDS can only be deducted by authorised entities. It is not possible for an individual or a HUF (Hindu Undivided Family) to do so. The 194H deduction threshold limit is 15000.

Section 194H Interest Rates


TDS deduction rates under Section 194H are 5% for fiscal year 2022-23. If the payee cannot provide PAN information, the TDS deduction will be 20%.

The TDS rate is not subject to any additional surcharges or education cess. However, different sections of TDS have different deduction rates. TDS rates for 194H vary depending on the fiscal year.

Deduction Period

 TDS must be deducted at the time of payment or credit to the payee’s account, whichever comes first.

If such an amount is credited to a suspense account or any other account, it is considered credited to the account of the payee and TDS must be deducted at the time of such credit.

Section 194H makes provisions for no or reduced TDS.

According to Section 197 of the ITA, entities can apply to the Income Tax Department for a lower rate or a NIL tax TDS certificate. However, such a certificate is available if the amount of TDS deducted exceeds the total income tax liability in a given fiscal year.

It should be noted that in order to claim no tax or a lower TDS rate, entities must file Form 13 and submit it to the Assessing Officer either manually or electronically. The application is processed and the required certificate is issued once the Assessing Officer is satisfied with the form.

To obtain the certificate, however, these documents must be submitted along with Form 13 

  • Assessment orders (copies) for the previous three fiscal years
  • The PAN card
  • Financial statements and audit reports for the previous three fiscal years
  • Income statements for the previous three fiscal years, as well as earnings projections for the current fiscal year
  • Income tax returns (copies), acknowledgement letters, and enclosures for the previous three fiscal years
  • The paying parties’ TDS account
  • E-TDS returns for the previous two fiscal years
  • Aside from lower TDS rates, individuals should learn about the TDS exemptions available under Section 194H in order to make the most of

What are the TDS exclusions for commissions or brokerage?

There are a few exceptions to this rule, such as commissions or brokerage fees that are not taxed at the source. They are as follows:

  • Insurance or loan underwriters are paid a
  • Any brokerage paid for the public issuance of securitiesAny brokerage paid on transactions involving securities listed on the stock exchange
  • The RBI makes payments to banking
  • Payment as a tax refund
  • Payments made to financial corporations under the Central Finance Act
  • Any contributions to LIC policies or other investments in co-operative societies
  • Direct taxation must be
  • Income from savings bank account interest, recurring deposits, Indra Vikas Patra, NSC, or Kisan Vikas Patra
  • Interest earned on NRE accounts Any commission or brokerage payments made by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call centre franchisees Any income received from a public or private institution that has been designated as a NIL TDs organisation. Any earnings from interest on compensation for Motor Vehicles Claims Tribunal