No TDS Filed? Your ₹8L Business Expense Gets Disallowed

If your family business pays commissions to HUFs without proper TDS and proof of service, the tax department can disallow the entire expense — inflating your taxable income, your tax bill, and even hurting your loan eligibility.

Here's what happened: ITAT Surat reversed an ₹8 lakh disallowance on commissions paid to two HUFs, after the business produced TDS records, loan referral logs, and proof the HUFs were actively operating.. Tax authorities had originally disallowed the commissions on the grounds that the payments lacked sufficient proof of genuine services rendered by the HUF recipients.. The tribunal's decision confirms that HUF commission payments are legally valid business expenses — but only when TDS is deducted and documentary evidence of actual services exists..

What you should do: File TDS under Section 194H on any commission above ₹15,000 paid to an HUF or individual — missing this single step can get the entire expense disallowed.. Maintain a paper trail for every commission: written referral agreements, transaction logs, and proof that the HUF recipient is running an active business with its own income.. If your business loan application is pending, check whether any disallowed expenses have inflated your taxable profit — a CA can file a rectification to show true net income to your lender..

An HUF's commission income is taxed in its own hands at slab rates — splitting income this way is legal, but only survives scrutiny if the HUF has its own PAN, bank account, and documented business activity.

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