Summary of TDS Provisions: Sections 194H and 194I

In the realm of tax deduction at source (TDS), Sections 194H and 194I play a crucial role, regulating TDS on commission payments and rent payments, respectively. Let’s explore the key provisions of these sections:

Section 194H: TDS on Commission Payments

Key Highlights:

1. Applicability: TDS is applicable on commission payments, and the rate is fixed at 5%, irrespective of the payer or payee type.
2. Threshold: TDS becomes applicable when the commission payment exceeds Rs. 15,000.
3. Calculation: TDS is deducted on the taxable amount before adding GST.
4. Definition of Commission: “Commission or brokerage” includes payments received for services rendered (excluding professional services) or any services related to buying or selling of goods or transactions involving assets, valuable articles, or things (excluding securities).
5. Who Must Deduct TDS: Any person, except individuals and Hindu Undivided Families (HUF). Individuals, HUFs, AOPs, BOIs are included if their business turnover exceeds Rs. 1 crore (or Rs. 50 lakhs for turnover from profession).

Time of TDS Deduction:

• TDS should be deducted at the time of payment or credit (booking of invoice), whichever occurs earlier.
• Even if the credit is made to an account other than the party’s account, such as a suspense account, TDS is still applicable.

Exemption:

• TDS under this section is not applicable on insurance commission (Section 194D applies).

Section 194I: TDS on Rent Payments

Key Highlights:

1. Applicability: TDS is applicable on rental payments made by any person, excluding individuals and HUFs. Individuals and HUFs are included if their business turnover exceeds Rs. 1 crore (or Rs. 50 lakhs for turnover from profession).
2. Types of Rental Payments:
   • Rent on plant and machinery: TDS rate is 2%.
   • Rent on land and buildings, furniture and fixtures: TDS rate is 10%.
3. Threshold: TDS is applicable when the annual rent payment exceeds Rs. 2,40,000.
4. Calculation: TDS is deducted on the taxable amount before adding GST.
5. Sub-letting: Rent includes sub-letting; therefore, TDS is applicable even if the payee is not the owner.
6. Exception: TDS is not deducted if rent is paid to a Real Estate Investment Trust (REIT) for a real estate asset owned by it.

Time of TDS Deduction:

• TDS should be deducted at the time of payment or credit (booking of invoice), whichever occurs earlier.
• Even if the credit is made to an account other than the party’s account, such as a suspense account, TDS is still applicable.