Whether presumptive taxation is aplicable for 194H

If the income is in the nature of commission or brokerage and is subject to TDS under Section 194H, then Section 44AD presumptive taxation is generally not available.

This is because Section 44AD(6)(ii) specifically excludes persons earning income in the nature of commission or brokerage, including agents earning commission on sales. Therefore, such income cannot be offered under the presumptive scheme of Section 44AD.

In such cases, the taxpayer is required to maintain regular books of account and comply with the applicable audit provisions if the turnover or gross receipts exceed the prescribed threshold limits.

The fact that the principal deducts TDS under Section 194H does not impact the method of accounting or eligibility for presumptive taxation. The TDS deducted is simply available as a tax credit and can be claimed while filing the income tax return.

However, if the receipts are actually for professional services and not commission income, it may be worthwhile to examine eligibility under Section 44ADA, subject to satisfaction of the relevant conditions.

For a detailed discussion on Section 194H, TDS rates, thresholds, and why commission income is excluded from Section 44AD, refer to:

TDS on Commission and Brokerage Section 194H, thresholds, rates, and 44AD exclusion explained