Real Estate Commission TDS
TDS deduction guide
Expert brief on Real Estate Commission TDS for businesses, promoters, and individuals. Reconcile with latest notifications before filing.
Post Your Requirement - FreeWhat this page helps you decide
- Confirm if the payments are classified as commission or brokerage under Section 194H of the Income Tax Act.
- Check the threshold limit (no TDS is required if the aggregate commission paid in a financial year does not exceed ₹15,000).
- Verify the standard TDS rate of 5% (applicable to resident payees) and understand compliance rules if PAN is not furnished.
- Identify exclusions (such as insurance commission u/s 194D or commission paid by MTNL/BSNL to public call office franchise managers).
Accuracy notes before you act
- Section 194H mandates a flat TDS rate of 5% on commission or brokerage paid to resident individuals, firms, or companies.
- If the payee fails to provide a valid PAN, TDS must be deducted at a higher rate of 20% under Section 206AA.
- TDS must be deducted at the time of credit of such income to the account of the payee or at the time of payment, whichever is earlier.
- TDS is not applicable on commission paid by the government, or on bank guarantee commissions/underwriting fees paid to banks.
- Quarterly TDS returns for Section 194H must be filed in Form 26Q.
Documents and facts to keep ready
- Valid PAN and address of the commission agent or broker.
- Invoices, commission accounts, and brokerage agreements.
- Challan details showing deposit of TDS into the government treasury.
- Form 16A certificates issued to the payee quarterly.
- Form 26AS/AIS downloaded to check sync and verify tax credits.
Common mistakes to avoid
- Failing to deduct TDS when aggregate annual payments exceed ₹15,000, triggering tax demands and interest u/s 201.
- Conflating commission u/s 194H with professional fees u/s 194J (which carries a higher 10% rate) or contract payments u/s 194C.
- Delaying the deposit of deducted tax beyond the 7th of the following month (or April 30th for March deductions), incurring 1.5% monthly interest.
- Failing to report the deductions in the quarterly Form 26Q return, attracting a ₹200 per day late fee u/s 234E.
- Deducting tax on reimbursement of actual expenses, which should be billed separately from the commission amount.
Frequently Asked Questions
1. What are the TDS rates, sections, and thresholds applicable to commission or brokerage on Real Estate Commission TDS?
Under Section 194H, TDS is deducted at 5% on payments for commission or brokerage related to Real Estate Commission TDS if the aggregate annual payment exceeds the threshold limit of ₹15,000.
2. What is the penalty for default or delay in TDS compliance for Real Estate Commission TDS?
Failure to deduct or deposit TDS on Real Estate Commission TDS on time attracts interest at 1% or 1.5% per month, late filing fees of ₹200 per day under Section 234E, and disallowance of expenses.
3. What is the threshold limit for TDS under Section 194H?
TDS is required to be deducted u/s 194H only if the aggregate amount of commission or brokerage paid or payable during the financial year exceeds ₹15,000. No TDS applies if the total amount is ₹15,000 or less.
4. What is the definition of commission or brokerage for tax purposes?
Commission or brokerage includes any payment received by a person acting on behalf of another person for services rendered (except professional services), or in the course of buying/selling goods, or in relation to any transaction relating to assets, valuable articles, or securities.
5. Does Section 194H apply to insurance commission?
No. Insurance commission is governed by a separate section, Section 194D (TDS rate is 5% for residents), and is subject to its own thresholds (₹15,000).
6. Does Section 194H apply to payments made by individuals?
Section 194H applies to individuals and HUFs only if they are liable to tax audit under Section 44AB (turnover > ₹1 crore for business or gross receipts > ₹50 lakh for profession) in the preceding financial year.
7. Is TDS applicable on bank commission or underwriting fees?
No. Under CBDT Circular No. 5/2012, no TDS is applicable on payments made to banks towards bank guarantee commission, underwriting fees, credit card commission, or warehousing charges.
8. What is the due date for depositing TDS deducted u/s 194H?
TDS must be deposited into the government treasury by the 7th of the following month (e.g., September TDS by October 7). For March deductions, the due date is April 30.
9. What form is used to file quarterly TDS returns for Section 194H?
All non-salary TDS deductions, including Section 194H, must be reported quarterly in Form 26Q on or before the due date (July 31, October 31, January 31, and May 31).
10. What is the penalty for late filing of TDS returns?
Under Section 234E, a late fee of ₹200 per day is charged for delayed filing of TDS returns, up to a maximum amount equal to the TDS amount in the return.
11. Can a payee obtain a lower TDS deduction certificate under Section 197?
Yes. If the payee's total income justifies a lower tax rate, they can apply in Form 13 online on the e-filing portal to obtain a lower or nil TDS certificate from their Assessing Officer u/s 197.
12. How does the agent verify TDS credits?
All TDS deductions u/s 194H appear in the taxpayer's Form 26AS and AIS under the deductor's TAN. The agent can verify these credits before filing their ITR.
13. Is TDS applicable on brokerage paid on the purchase of securities?
No. Under the explanation to Section 194H, no TDS is applicable on brokerage or commission paid in relation to transactions in securities on a recognized stock exchange.
14. What is the interest rate for delayed TDS payment?
If TDS is deducted but not deposited within the due date, interest at 1.5% per month is payable from the date of deduction to the date of deposit.
15. Does Section 194H apply to payments made to non-residents?
No. Section 194H applies only to payments made to resident taxpayers. Payments to non-residents or NRIs are governed by Section 195, where TDS rates depend on the DTAA or Income Tax Act provisions.