Comparative Legal Analysis of TDS on Commission and Brokerage : Clause 393(1)[Table: S.No. 1(ii)] and Clause 393(4)[Table: S.No. 1] of the Income Tax Bill, 2025 Vs. Section 194H of Income-tax Act, 1961

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....he Income-tax Act, 1961, established the framework for deduction of tax at source on commission or brokerage payments, aiming to plug revenue leakages and ensure tax compliance at the point of payment. With the introduction of the Income Tax Bill, 2025, a comprehensive overhaul of TDS provisions is proposed, encapsulated within Clause 393. Specifically, Clause 393(1)[Table: S.No. 1(ii)] and Clause 393(4)[Table: S.No. 1] address TDS on commission and brokerage, introducing nuanced changes in scope, coverage, and compliance requirements. This commentary undertakes a detailed legal analysis of these new provisions, compares them with the extant Section 194H, and evaluates their implications for stakeholders. Objective and Purpose The legisla....

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....s other than insurance commission. The term "specified person" is critical and, though not defined in the excerpt, generally refers to non-individuals or individuals/HUFs crossing specified turnover thresholds, in line with the existing Section 194H framework. * Threshold and Rate: The threshold of Rs. 20,000 mirrors the amended threshold u/s 194H (as per the Finance Act, 2025). The rate of 2% is identical to the current Section 194H rate. * Timing of Deduction: The obligation to deduct at the earlier of credit or payment ensures that TDS is not circumvented by deferring payment or using suspense accounts, reinforcing the anti-avoidance objective. * Exclusions: Insurance commission is carved out and separately addressed under S.No. 1(....

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....ions (Section 194D under the 1961 Act and S.No. 1(i) under the Bill). Person Responsible to Deduct Section 194H applies to all persons other than individuals/HUFs with turnover below the prescribed threshold. The Bill introduces the term "specified person," which, based on the context and legislative history, likely encompasses a similar class of payers. However, clarity on the precise definition of "specified person" in the Bill is essential for full alignment. The extension of TDS liability to certain individuals/HUFs with higher turnover is a progressive measure, ensuring that large business/professional entities cannot escape TDS obligations merely due to their organizational form. Thresholds and Rates Both regimes set a Rs. 20,000....

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....icability All persons except individuals/HUFs below turnover threshold Specified persons (definition to be clarified) Threshold Rs. 20,000 (post-2025) Rs. 20,000 Rate 2% 2% Exclusion of Insurance Commission Yes (covered by section 194D) Yes (separately covered) Exemption for BSNL/MTNL PCO Franchisees Yes Yes Time of Deduction Earlier of credit/payment Earlier of credit/payment Deeming Provision for Suspense Account Yes Presumed Yes (not explicitly quoted) Ambiguities and Potential Issues While the Bill appears to carry forward the established framework, several interpretative and practical questions may arise: * Definition of "Specified Person": The lack of an explicit definition in the extract ma....

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....e, recognizing the low-margin, high-volume nature of such businesses and avoiding unnecessary compliance costs. 4. Revenue Administration From the tax administration perspective, the continuity and clarity in TDS provisions facilitate monitoring and enforcement. The anti-avoidance provisions (e.g., suspense account deeming) close common loopholes. Conclusion Clause 393(1)[Table: S.No. 1(ii)] and Clause 393(4)[Table: S.No. 1] of the  Income Tax Bill, 2025, represent a largely faithful continuation of the TDS regime on commission and brokerage as established under Section 194H of Income-tax Act, 1961. The preservation of key parameters-applicability, threshold, rate, timing, and exemptions-reflects legislative intent to ma....