Section 194H

Section 194H — the law in short

What the courts have decided on section 194H, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Bharti Cellular Ltd v ACIT Supreme CourtHelps taxpayer
  We sell prepaid SIMs and vouchers to distributors below list price. Is that margin commission under 194H?
  No. The Supreme Court held that the distributor buys the starter kits and recharge vouchers at a discount on a principal-to-principal basis, so the margin is a trade discount and not commission or brokerage; the operator has no obligation to deduct under s.194H.
• Singapore Airlines Ltd v CIT Supreme CourtCuts both ways
  My agents keep the difference between the price they charge customers and the net price they pay me — do I have to deduct TDS on money that never passed through my hands?
  Yes. The Supreme Court held on 14 November 2022 that the supplementary commission retained by IATA travel agents — the excess of the actual fare charged to the passenger over the net fare payable to the airline — is "commission" under section 194H, and the airlines were bound to deduct tax at source on it. Section 194H is read with section 182 of the Contract Act: where the contract shows a principal-agent relationship, the definition is attracted. But because the agents had paid tax on those amounts, no recovery of the shortfall could be made from the airlines; only interest under section 201(1A) survives, and the section 271C penalties were quashed.
• Director, Prasar Bharati v CIT Supreme CourtHelps department
  My advertising agency bills the advertiser, remits the money to me, and I pay it fifteen per cent back as its margin. The agreement calls it commission. Is that section 194H?
  Yes, on these facts. The Supreme Court held that the fifteen per cent paid to accredited advertising agencies under Doordarshan's agreements was commission within section 194H, so tax had to be deducted on it. What decided the case was the arrangement, not the label on the ledger: the agreement called the sum commission throughout, it was paid over after the appellant had collected the money from the agencies, and the relationship was one of principal and agent rather than principal to principal. Read it against Ahmedabad Stamp Vendors and Bharti Cellular, where the same section did not apply because the distributor bought on its own account.
• CIT v Ahmedabad Stamp Vendors Association Supreme CourtHelps taxpayer
  I buy stamp papers from the government at a discount and resell them. Is that discount commission under 194H?
  No. The sale of stamp papers by the State to a licensed vendor is a sale on a principal-to-principal basis, and the 0.50% to 4% margin is a cash discount for bulk purchase, not commission or brokerage attracting deduction under s.194H.
• Pr. CIT (TDS) v National Health and Education Society — hospital consultants' fees fall under s.194J, not s.192 High CourtHelps taxpayer
  The TDS officer says our consultant doctors are really employees, that their fees are salary, and that we should have deducted under s.192 instead of s.194J. Is he right?
  Not on these facts. The hospital engaged Hospital Based Consultants and deducted under s.194J. The Assessing Officer held they were employees, that s.192 applied, and passed orders under s.201 treating the hospital as in default; the Commissioner (Appeals) and the Tribunal went against him on that point and the Revenue appealed under s.260A. The Bombay High Court held the question squarely covered by its own earlier Division Bench decision in Commissioner of Income-tax (TDS), Pune v Grant Medical Foundation (Ruby Hall Clinic), where the same Court had held that no relationship of employer and employee existed between a hospital and its consultant doctors and had answered the question in favour of the assessee. No substantial question of law arose, and all six appeals were dismissed with no order as to costs. Questions on s.194C versus s.194J for outsourced services and on drug handling charges were held to turn on findings of fact, and a question on the time limit for orders under s.201(1) was left open as academic.
• CIT v JDS Apparels Pvt Ltd High CourtHelps taxpayer
  The bank keeps a small percentage of every credit card sale before crediting me. Should I have deducted tax at source on it under section 194H?
  No. The Delhi High Court held that what the acquiring bank retains when settling a credit card sale is a fee for banking services, not commission or brokerage. Section 194H catches a payment received by a person acting on behalf of another, and the bank and the retailer deal as independent parties on a principal to principal basis; the bank is a middleman for nobody and is indifferent to the goods being sold. The disallowance of Rs.44,65,654 under section 40(a)(ia) therefore fell away. The Court added that section 40(a)(ia) is a deterrent and penal provision that should be construed strictly.
• Jagran Prakashan Ltd v DCIT (TDS) High CourtHelps taxpayer
  I publish a newspaper and allow accredited advertising agencies the standard 15 per cent trade discount. The TDS officer says that is commission under section 194H and has raised a demand on me. Is that right?
  No, on the reasoning available in this judgment. The Allahabad High Court held that section 194H applies only where the recipient acts on behalf of the payer, and here there was no agreement between the newspaper and the advertising agencies and no agency had ever been appointed. The Kerala decision in Director, Prasar Bharati, on which the department relied, turned on a written agency agreement containing an express clause about withholding tax, and was held to be inapplicable. The Delhi High Court had already decided the same question against the department in Living Media India, and the Supreme Court had dismissed the department's special leave petition against it on 11 December 2009.
• N C Shaw and Co Beverages P Ltd v ITO (TDS) ITATHelps taxpayer
  I manufacture liquor and settle volume-linked scheme discounts with my distributors by credit note. The TDS officer says those credit notes are commission under s.194H and has made me an assessee in default. Is he right?
  No, on these facts. The Kolkata Bench held that a post-sale discount in cash or in kind, given to a buyer with whom the seller deals on a principal-to-principal basis, is a normal sales discount that reduces the sale price and is not commission or brokerage within Explanation (i) to s.194H, so there was no obligation to deduct and no default under s.201(1) or interest under s.201(1A); the consequential s.271C penalty went with it. Note what this order is not: although the assessee argued s.194R and s.194Q at length, the Tribunal decided the case entirely on s.194H and its operative paragraphs say nothing about either provision.
• Muradul Haque v ITO ITATHelps taxpayer
  TDS was not deducted on commission I paid. Can the AO disallow all of it, or only 30%?
  Only 30 per cent, on this view, and part of the disallowance went altogether. The Delhi Tribunal held the amendment restricting the s.40(a)(ia) disallowance to 30 per cent of the expenditure instead of 100 per cent to be curative and to apply retrospectively, and restricted the disallowance accordingly for payees paid more than Rs 10,000. It separately deleted in full the disallowance referable to four payees who had each been paid less than Rs 10,000, because no obligation to deduct under s.194H arose on those payments at all.
• Dish TV India Ltd v ACIT ITATHelps taxpayerNo later treatment found
  Two High Courts disagree on short deduction and mine has not ruled. Which view applies to me?
  The one favourable to the assessee. Where two non-jurisdictional High Courts differ and the jurisdictional High Court has not ruled, the Mumbai Tribunal adopted the assessee-favourable view, so deducting 2 per cent under s.194C where the officer said 10 per cent under s.194J attracted no disallowance under s.40(a)(ia): there is nothing in that section to treat an assessee as a defaulter where there is only a shortfall in deduction. The Tribunal did not reason the tie-break for itself - it adopted the reasoning of two coordinate Benches and held itself bound to follow them.
• Statutory position — s.194H: two per cent on commission or brokerage paid to a resident since 1 October 2024, on a threshold that became twenty thousand rupees on 1 April 2025 CBDT Circulars & InstructionsCuts both ways
  I pay my selling agents a percentage on every order they bring in, and I give my distributors a discount off the list price. Do I deduct under section 194H, at what rate, and from what figure does the obligation start?
  Section 194H makes a payer who is not an individual or a Hindu undivided family deduct tax on any income by way of commission or brokerage paid to a resident, at two per cent. It was five per cent until 30 September 2024 and was substituted by Act No. 15 of 2024 with effect from 1 October 2024, so anything still applying five per cent to a later payment is applying a superseded rate. The threshold is an annual aggregate, not a monthly one: no deduction is required where the amount, or the aggregate of the amounts, credited or paid or likely to be credited or paid to that payee during the financial year does not exceed twenty thousand rupees, a figure substituted for fifteen thousand rupees by Act No. 7 of 2025 with effect from 1 April 2025 — and it stayed an annual aggregate on the very date section 194-I's rent threshold became a monthly one, so a payer who runs both rent and commission now applies two different kinds of test. Insurance commission is expressly outside the section and belongs to section 194D, and services rendered that are "professional services" are excluded from the definition and belong to section 194J; the section is also not divided into sub-sections, being printed as one unnumbered operative paragraph, three provisos and an Explanation in four clauses. All of this is the Income-tax Act, 1961, which the CBDT's transition FAQ says stands repealed on 1 April 2026. For a credit or payment on or after that date the corresponding provision is serial number 1(ii) of the Table to section 393(1) of the Income-tax Act, 2025, at the same two per cent and the same twenty thousand rupees.
• Statutory position — s.194-IB and s.194M: the once-a-year deduction on rent, the cap that operates only under s.206AA, the gateway that keeps most individuals out of s.194M, and why neither needs a TAN CBDT Circulars & InstructionsCuts both ways
  I am an individual paying Rs 70,000 a month rent, and separately I have paid an interior contractor Rs 62 lakh for my own house. When exactly do I deduct, how much, and do I need a TAN?
  Under section 194-IB you deduct once, not monthly: the tax is deducted at the time of credit of rent for the last month of the previous year, or the last month of the tenancy if you vacate during the year, or at the time of payment of that rent, whichever is earlier, and the rate is two per cent of the income by way of rent, substituted for five per cent with effect from 1 October 2024. Under section 194M you deduct two per cent, again substituted for five per cent from the same date, but only if you are not a person required to deduct under section 194C, 194H or 194J, and only if the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Neither section requires a TAN: section 194-IB(3) and section 194M(2) each disapply section 203A.
• Statutory position — s.194M and s.194-IB: the rate fell from five per cent to two per cent on 1 October 2024 CBDT Circulars & InstructionsCuts both waysNo later treatment found
  My client is an individual paying a contractor and also paying rent. He has no TAN. What does he deduct, and at what rate?
  Two per cent under either section, for anything on or after 1 October 2024; five per cent before that. Section 194M applies to an individual or HUF not already covered by s.194C, s.194H or s.194J who pays a resident more than fifty lakh rupees in a financial year for contract work, commission or brokerage or professional fees. Section 194-IB applies to an individual or HUF outside the second proviso to s.194-I who pays a resident rent exceeding fifty thousand rupees for a month or part of a month. Neither section requires a TAN, because s.203A is disapplied in both.
• Statutory position — s.197: the Assessing Officer may certify a lower rate, or nil, for a listed section, but only on the payee's application and only for a period of the previous year — the 1961 Act position, for deductions up to 31 March 2026 CBDT Circulars & InstructionsCuts both ways
  My money is stuck. Every invoice I raise has tax deducted at the full rate, my actual tax for the year is far less than the deductions, and I only get it back a year later when the refund comes. Somebody told me to apply for a lower-deduction certificate under section 197. What does section 197 actually say — which payments does it cover, what does the Assessing Officer have to be satisfied about, what form do I file, and can the certificate be backdated to cover the deductions already made?
  Section 197(1) lets the payee apply to the Assessing Officer for a certificate that the payer may deduct at a lower rate, or not at all. It is not open-ended: it works only for the sections named in it, and the Assessing Officer must be satisfied that “the total income of the recipient justifies” the lower rate. The list is sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195 — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 and 194Q by Act No. 15 of 2024 with effect from 1 October 2024. Section 197(2) then binds the payer: once a certificate is given, he deducts at the certified rate, or nothing, until the Assessing Officer cancels it. Section 197(2A) is the rule-making power, and the rules made under it are rule 28 (application in Form No. 13, filed electronically), rule 28AA (how the rate is worked out and how long the certificate lasts) and rule 28AB (a no-deduction certificate for trusts and other section 139(4C) filers). Nothing in the section or the rules confers a power to backdate a certificate, and in substance it operates forward: rule 28AA(4) sends it to the named deductor, who cannot un-deduct months already past. From 1 April 2026 this machinery is gone — the Income-tax Act, 1961 was repealed by section 536 of the Income-tax Act, 2025 and the successor is section 395 of the 2025 Act, applied for in Form No. 128 under rule 213 of the Income-tax Rules, 2026, and from the same date section 395(6) lets that application go to a prescribed income-tax authority instead of the Assessing Officer.
• CIT v Idea Cellular Ltd High CourtHelps departmentOverruled
  I sell prepaid SIM cards and recharge coupons to my distributors at a discount. Is that discount commission on which I must deduct tax under section 194H?
  Yes, on the Delhi High Court's view. It set aside the Tribunal and held that the relationship between the cellular operator and its prepaid market associates was principal and agent, not principal to principal. The distributor never became the owner of the SIM card, which remained the operator's property and gave the ultimate subscriber access to the operator's network; what was being delivered was a service, and a service cannot be bought and sold. The distributor was a link in the chain by which the operator provided that service. The discount was therefore commission within section 194H, and the operator was rightly treated as in default under section 201(1) with interest under section 201(1A).

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.