Section 194G & 194H of Income Tax Act

section 194G

Under section 194G of Income Tax Act, 1961; any person who is responsible for paying to any person; who is or has been distributing, stocking, purchasing or selling lottery tickets; any income by way of commission, remuneration or prize on such tickets in an amount exceeding Rs. 15000; shall deduct income-tax thereon at 5%; 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 cheque or draft or by any other mode.

Section 194G & 194H of Income Tax Act

Thus, any person who pays any remuneration, commission or prize on lottery tickets to a person; who is stocking, distributing, purchasing or selling lottery tickets, is liable to deduct TDS U/section 194G. No surcharge, education cess or SHEC would be added to the tax deduction. In case if the deductee does not furnish PAN, TDS rate would be 20%.

If any income is credited to any account, whether called “suspense account” or 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.

Due Date for Deposit of TDS

The time for deposit of TDS to the government is within one week from the end of the month of the tax deduction. But for the month of March, the due date is before 30th April. Form 16A is to be issued for each quarter within 15 days from the due date for furnishing the statement of TDS deduction; i.e. on or before 15th August, 15th November, 15th February and 15th June. In case of deduction by or on behalf of the government, TDS shall be deposited on the same day. If the amount is paid/credited on the last day of the FY, then TDS has to be deposited within two months from the end of that FY.

Quarterly return of TDS is to be issued in Form 26Q on or before 31st July, 31st October, 31st January and 31st May.

An assessee can also apply in Form 13 to an assessing officer for no deduction or deduction at a lower rate. If the assessing officer is satisfied that his total income justifies the deduction of income tax at any lower rate or no deduction; he shall give him such certificate on an application made by such person.

Section 194H of the Income Tax Act, 1961

U/S 194H of the income tax act, any person not being an individual or HUF, who is responsible for paying, 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/payment of such income, deduct income tax at 5%, provided such income exceeds Rs. 15000 per annum. No surcharge or education cess or SHEC shall be deducted. In case if PAN is not furnished, TDS rate shall be 20%.

This section is also applicable to an individual or HUF, whose total sales, gross receipts or turnover exceeds Rs. 1 crore in the case of business or Rs. 25 lakhs in the case of the profession.

Commission or brokerage shall include the following:

  • Any payment received/receivable for services rendered by a person on behalf of another person (not being professional services)
  • Any payment received/receivable for services in the course of buying or selling of goods
  • Payment received/receivable in relation to any transaction relating to any asset, valuable article or things except securities.

The above payment may be direct or indirect and may be made by a person acting on behalf of another person. It must be noted that presumptive taxation is not applicable to income from commission.

The payee may make an application to the assessing officer U/S 197 for deduction at a lower rate or no deduction.

The time for deposit of TDS to the government is within one week from the end of the month of the tax deduction. But for the month of March, the due date is before 30th April. Form 16A is to be issued for each quarter within 15 days from the due date for furnishing the statement of TDS deduction; i.e., on or before 15th August, 15th November, 15th February and 15th June. In case of deduction by or on behalf of the government, TDS shall be deposited on the same day. If the amount is paid/credited on the last day of the Financial Year, then TDS has to be deposited within two months from the end of that FY.

Exceptions to section 194H

  • Commission or brokerage paid by BSNL or MTNL to their public call center franchises.
  • Commission paid by RBI to the bank for collection of tax on behalf of the government.
  • TDS on insurance commission (section 194D will be applicable)
  • Commission or brokerage paid to underwriters
  • Commission paid by employer to the employee (such TDS will be deducted U/S 192)
  • Brokerage and sub-brokerage on public issue of securities
  • Brokerage on stock exchange transaction of securities

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