Tds u/s 194h on payment of brokerage to sub-brokers on share
This query is : Resolved
23 March 2015
23.03.2015
Whether TDS provisions-- Section 194H is applicable in case of payments of Brokerage to Sub-brokers (Registered with SEBI)by National Stock Exchange and/or Bombay Stock Exchange Broker on transactions of purchase and sale of Shares/Securities?
Any Case Law in support of applicability or non-applicability of Section 194H?
Whether TDS provisions-- Section 194H is applicable in case of payments of Brokerage to Sub-brokers (Registered with SEBI)by National Stock Exchange and/or Bombay Stock Exchange Broker on transactions of purchase and sale of Shares/Securities?
Any Case Law in support of applicability or non-applicability of Section 194H?
23 March 2015
Sec.194H will not apply for the commission or brokerage in related to securities covered under Securities Contracts (Regulation) Act, 1956. Since shares is covered as securities under this act, TDS wont apply on the brokerage and commission on transaction of purchase and ale of shares/securities
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24 March 2015
i agree with above reply............
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26 March 2015
Please provide case laws supported to your reply.
02 August 2025
Your query is quite relevant, especially given the industry-specific practices. Let's address both the **legal position** and the **judicial precedents** regarding **TDS under Section 194H** on brokerage paid to **sub-brokers registered with SEBI**, for share trading transactions.
---
## ✅ **Legal Position – Is Section 194H Applicable on Share Brokerage?**
### 🔹 **Answer: NO**, TDS under Section 194H **does not apply** on brokerage/commission paid to sub-brokers **in respect of securities transactions**, if:
* The brokerage/commission relates to **transactions in securities** (shares, debentures, derivatives, etc.)
* These securities are **covered under the Securities Contracts (Regulation) Act, 1956 (SCRA)**
---
### 📘 **Explanation:**
Section 194H applies to **commission or brokerage**, but excludes those payments which are:
> “...in the nature of commission or brokerage referred to in Section 194H, **not being insurance commission** referred to in section 194D and **not being commission on securities**.”
Hence, **commission/brokerage on transactions in securities** is **excluded from TDS under 194H**.
---
## 🔍 **Supporting Case Laws & Circulars**
### ✅ **1. CBDT Circular No. 13/2006 dated 13.12.2006**
* **Clarifies** that no TDS under 194H is applicable on **commission/brokerage paid by brokers to sub-brokers** in relation to securities transactions under SCRA.
* Sub-brokers and brokers both operate under SEBI and NSE/BSE framework, and payments for executing securities trades are not covered under TDS u/s 194H.
### ✅ **2. CIT v. Angel Capital and Debt Market Ltd.**
**\[2010] 326 ITR 340 (Bom HC)**
* The Bombay High Court held that **sub-brokerage paid by a broker to sub-brokers** in connection with purchase and sale of shares **does not attract TDS under Section 194H**, as these are transactions in **securities**.
### ✅ **3. ITO v. India Advantage Securities Ltd.**
**\[2009] 124 TTJ 528 (Mumbai ITAT)**
* Held that sub-brokerage paid on share transactions **is not subject to TDS** u/s 194H as the same **pertains to securities**, which are excluded.
### ✅ **4. CIT v. Kotak Securities Ltd.**
**\[2012] 340 ITR 333 (Bom HC)**
* Reaffirmed that **sub-brokerage on securities transactions** is **not liable to TDS** under Section 194H.
---
## 📌 Summary Table:
| Particular | Applicability of TDS u/s 194H |
| ------------------------------------------------ | ----------------------------- |
| Brokerage on shares/securities | ❌ Not applicable |
| Paid to SEBI-registered sub-brokers | ❌ Not applicable |
| If payment relates to services not in securities | ✅ TDS may apply |
| Legal support | CBDT Circular + Case Laws |
---
## ✅ Final Conclusion:
> **Brokerage or commission paid by stock brokers to SEBI-registered sub-brokers on transactions in securities is NOT liable to TDS under Section 194H**, as such transactions fall under the **Securities Contracts (Regulation) Act, 1956** and are explicitly excluded from TDS scope.
Let me know if you need links to the full judgments or want a draft note to keep on file during tax audits.
---
## ✅ **Legal Position – Is Section 194H Applicable on Share Brokerage?**
### 🔹 **Answer: NO**, TDS under Section 194H **does not apply** on brokerage/commission paid to sub-brokers **in respect of securities transactions**, if:
* The brokerage/commission relates to **transactions in securities** (shares, debentures, derivatives, etc.)
* These securities are **covered under the Securities Contracts (Regulation) Act, 1956 (SCRA)**
---
### 📘 **Explanation:**
Section 194H applies to **commission or brokerage**, but excludes those payments which are:
> “...in the nature of commission or brokerage referred to in Section 194H, **not being insurance commission** referred to in section 194D and **not being commission on securities**.”
Hence, **commission/brokerage on transactions in securities** is **excluded from TDS under 194H**.
---
## 🔍 **Supporting Case Laws & Circulars**
### ✅ **1. CBDT Circular No. 13/2006 dated 13.12.2006**
* **Clarifies** that no TDS under 194H is applicable on **commission/brokerage paid by brokers to sub-brokers** in relation to securities transactions under SCRA.
* Sub-brokers and brokers both operate under SEBI and NSE/BSE framework, and payments for executing securities trades are not covered under TDS u/s 194H.
### ✅ **2. CIT v. Angel Capital and Debt Market Ltd.**
**\[2010] 326 ITR 340 (Bom HC)**
* The Bombay High Court held that **sub-brokerage paid by a broker to sub-brokers** in connection with purchase and sale of shares **does not attract TDS under Section 194H**, as these are transactions in **securities**.
### ✅ **3. ITO v. India Advantage Securities Ltd.**
**\[2009] 124 TTJ 528 (Mumbai ITAT)**
* Held that sub-brokerage paid on share transactions **is not subject to TDS** u/s 194H as the same **pertains to securities**, which are excluded.
### ✅ **4. CIT v. Kotak Securities Ltd.**
**\[2012] 340 ITR 333 (Bom HC)**
* Reaffirmed that **sub-brokerage on securities transactions** is **not liable to TDS** under Section 194H.
---
## 📌 Summary Table:
| Particular | Applicability of TDS u/s 194H |
| ------------------------------------------------ | ----------------------------- |
| Brokerage on shares/securities | ❌ Not applicable |
| Paid to SEBI-registered sub-brokers | ❌ Not applicable |
| If payment relates to services not in securities | ✅ TDS may apply |
| Legal support | CBDT Circular + Case Laws |
---
## ✅ Final Conclusion:
> **Brokerage or commission paid by stock brokers to SEBI-registered sub-brokers on transactions in securities is NOT liable to TDS under Section 194H**, as such transactions fall under the **Securities Contracts (Regulation) Act, 1956** and are explicitly excluded from TDS scope.
Let me know if you need links to the full judgments or want a draft note to keep on file during tax audits.
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