S N Mishra (Accounts Professional) (27 Points)
03 August 2010Is TDS liable to deduct on payment to a sub broker for commission from dealing in securities (Brokerage Sharing by a main SEBI Registered Broker) ? Please give me your kind opinion on the said matter.
Aditya Maheshwari
(CA in Practice)
(35867 Points)
Replied 03 August 2010
Section 194H states as under:
Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, 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 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 a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 43[ten] per cent :
Explanation.—For the purposes of this section,—
(i) “commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities;
(ii) the expression “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;
(iii) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)45 ;
(h) “securities” include—
(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;
(ia) derivative;
(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;
(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
(id) units or any other such instrument issued to the investors under any mutual fund scheme;
1 [ie) any certificate or instrument (by whatever name called), issue to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgage debt, as the case may be;]
(ii) Government securities;
(iia) such other instruments as may be declared by the Central Government to be securities; and
(iii) rights or interest in securities;
Aditya Maheshwari
(CA in Practice)
(35867 Points)
Replied 03 August 2010
Since payment of brokerage to subbrokers arises from brokerage received on securities no TDS is deductible on payment of commission in securities to subbroker.
Dheeraj
(Learner)
(1100 Points)
Replied 03 August 2010
A person can deduct TDS, if he/she has to claim the expense incurred
& it can be duducted on one's income
& there is no boundation to deduct TDS if total payment does not exceed rs. 20,000
here in your's case, commission is sub broker's income...
and according to my opinion u can deduct TDS
Aditya Maheshwari
(CA in Practice)
(35867 Points)
Replied 03 August 2010
Dear Dheeraj
You can deduct TDS on each and every payment for expenses if u want to as all expenses are incomes of the other person but we have to check whether the same is liable for tax deduction or not.
So the question here is whether TDS is liable to be deduction from brokerage paid to subbrokers in securities which is not liable as per section 194H quoted above.
Also for Section 194H the limit for TDS deduction is Rs. 5,000/- (w. e. f. 01.07.2010) and not Rs. 20,000/-.
Please answer keeping in mind the relevant principles of law not general principles.
S N Mishra
(Accounts Professional)
(27 Points)
Replied 17 August 2010
| Originally posted by : Aditya Maheshwari | ||
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Dear Dheeraj You can deduct TDS on each and every payment for expenses if u want to as all expenses are incomes of the other person but we have to check whether the same is liable for tax deduction or not. So the question here is whether TDS is liable to be deduction from brokerage paid to subbrokers in securities which is not liable as per section 194H quoted above. Also for Section 194H the limit for TDS deduction is Rs. 5,000/- (w. e. f. 01.07.2010) and not Rs. 20,000/-. Please answer keeping in mind the relevant principles of law not general principles. |
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Dear Sir (Aditya Ji)
Could you tell me the meaning & expression of the word "(not being professional services)" mentioned in Section 194H. I think that the service rendered by a Sub-Broker to the main broker is just like professional services. This issue is now a very big issue in the stock market that where TDS is liable to deduct or not on such payment made to the sub-brokers, because if the assessing officer or the concerned regulatory rejects the claim towards commission paid to their sub-broker, there could be a large tax liability raised on the broker. I'll very thankful to you if you provide me any case decision about the said matter.
Manisha
(CA & CS)
(161 Points)
Replied 25 March 2011
Dear all,
The qs. raised by Mr.Sachida Nand has not been answered.
Please can anyone reply in relation to the above question?
"Could you tell me the meaning & expression of the word "(not being professional services)" mentioned in Section 194H. I think that the service rendered by a Sub-Broker to the main broker is just like professional services. This issue is now a very big issue in the stock market that where TDS is liable to deduct or not on such payment made to the sub-brokers, because if the assessing officer or the concerned regulatory rejects the claim towards commission paid to their sub-broker, there could be a large tax liability raised on the broker. I'll very thankful to you if you provide me any case decision about the said matter."
Thanks in advance and regards.
Pankaj Arora
(Learner)
(3134 Points)
Replied 25 March 2011
payment made to broker or sub broker tds should be deduct on commision not as professional and line which are asking about means whome tds you are deducting u/s 194H he should not be professional or if he is professional than deduct tds u/s 194J.
Manisha
(CA & CS)
(161 Points)
Replied 25 March 2011
Thank you Mr. Pankaj,
But in the section 194H it clearly says under explanation that
“commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities"
So basically I m not able to understand whether the TDS shall be deducted or not.
Please Clarify.
Also refer any case decidion in relation to this matter.
Thanks in advance.
Pankaj Arora
(Learner)
(3134 Points)
Replied 25 March 2011
TDS have to deduct on commission paid to broker or sub broker u/s 194H but I don’t have any case law regarding it.
S. THIYAGARAJAN
(ACCOUNTANT)
(60 Points)
Replied 05 August 2011
Dear Sirs,
Brokerage paid to sub broker is not expense (we sharing the Brokerage with sub broker) of Broker because when we collect the sub broker brokerage we credit it to liability only
Client A/c Dr [Asset]
Main broker brokerage CR [Income]
Sub broker Brokerage Cr [Liability]
So here we want to deduct the TDS from Sub Broker Brokerage?
Mohit Rathi
(Article Assistant (CA Final))
(161 Points)
Replied 07 October 2011
As the payment of subbrokerage indirectly relates to securities it is exempt from deducting tds. i am currently auditing a stock broking firm & there is an irony. they deduct tds u/s 194h for paying subbrokerage in Normal trading Session but they do not deduct tds for subbrokerage in case of IPO. So i am little confused about applicability of this section. can anybody help in this matter?
CAclubindia
