Easy Steps to Deduct TDS on Commission & Brokerage

Commission or Brokerage includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person: (a) for services rendered (not being professional services), or (b) for any services in the course of buying or selling of goods, or (c)  in relation to any transaction relating to any asset, valuable article or thing, not being securities

The 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;

Persons Responsible to Deduct Tax on Commission & Brokerage

All the Individuals and HUF who were covered under section 44AB(A) and (b) in the previous year, the payer and company are liable to deduct tax as per the procedure given below.

However, individuals and HUF who were not covered u/s 44AB(a) and (b) like whose turnover/receipts does not exceeds Rs.1,00,00,000/25,00,000 as the case may be are not required to deduct TDS on commission & brokerage.

Exemption Limit & Non-deduction of Tax

There is no need to deduct Tax on commission or brokerage if the transaction does not exceed Rs.5,000 (Rs.2,500 upto 30^th June, 2010).

On some transactions or specified payments, there is no need to deduct tax as follows:

• Bank guarantee commission;
• Cash management service charges;
• Depository charges on maintenance of DEMAT accounts;
• Charges for warehousing services for commodities;
• Underwriting service charges;
• Clearing charges (MICR charges);
• Card or debit card commission for transaction between the merchant establishment and acquirer bank. 

Time for Deduction of TDS

The payer should deduct Tax on commission or brokerage at the time of payment or credit whichever is earlier. When entry has made in the books of account treated as payment credit to the account of payee. So it is the liability of the payer to deduct TDS at the time of credit such payment.

Time Limit for Deposit of TDS

In any other cases:

The TDS has to be deposited on or before 30^th day of April, where the income or amount is credited or paid in the month of March; and in other case on or before 7 days from the end of the month in which the deduction is made.

In the case of office of the Government:

On the same day where the tax is paid without production of income-tax challan; and on or before 7 days from the end of the month in which the deduction is made, where tax is paid accompanied by an income-tax challan.

TDS Returns/Statement

The payer is responsible to submit TDS return/statement for the quarter ending in the year on form no.26Q. The deadlines to submit TDS return in the case of commission & brokerage are 15^th July, 15^th Oct, 15^th Jan and 15^th May. In the case of Office of the Government (payer) the deadlines are 31^st July, 31^st October, 31^st Jan and 15^th May.

Deadlines to issue TDS certificate and form

The due dates to issue TDS certificate to the deductee on form no.16A are 30^th July, 30^th October, 30^th January and 30^th May.