Section 194H — TDS on Commission & Brokerage

For FY 2025-26 the threshold is ₹20,000 per payee per financial year, raised from ₹15,000 with effect from 1 April 2025 (Budget 2025). No TDS is deducted until total commission or brokerage to one payee in the year crosses ₹20,000. Once it does, TDS applies to the whole amount, not just the excess over ₹20,000.

Yes. The Section 194H TDS rate was cut from 5% to 2% by the Finance (No. 2) Act 2024, effective 1 October 2024. For any commission credited or paid on or after that date, deduct 2% (or 20% if the payee has no PAN). Commission credited before 1 October 2024 was still subject to the old 5% rate.

If the payee does not provide a valid PAN, TDS under Section 194H is deducted at 20% under Section 206AA — the higher of the applicable rate (2%) or 20%. So a missing or invalid PAN pushes the deduction from 2% to 20%, and the deductor must also quote the correct PAN in the TDS return to avoid short-deduction demands.

Any person paying commission or brokerage to a resident must deduct 194H TDS, except individuals and HUFs whose turnover in the preceding year did not exceed the Section 44AB audit limit (₹1 crore for business, ₹50 lakh for profession). Companies, firms, LLPs and AoPs must always deduct, regardless of turnover. Individuals/HUF below the audit limit may fall under Section 194M instead.

Section 194H covers commission or brokerage — any payment for services rendered (not being professional services) or for any service in the course of buying or selling goods, or in relation to any transaction relating to an asset, valuable article or thing (other than securities). Typical examples are stockbroker brokerage, real estate agent commission and distributor commission on an agency basis.

TDS under Section 194H is deducted at the earlier of (1) the time of credit of the commission to the account of the payee — including credit to a suspense or any other account — or (2) actual payment by cash, cheque, draft or any other mode. For advance commission, TDS is deducted at the time of the advance credit or payment.

If the GST on the commission is shown separately on the invoice, TDS under Section 194H is deducted only on the commission value, excluding the GST component (CBDT Circular 23/2017). If GST is not separately indicated, TDS is deducted on the whole invoice amount. This mirrors the treatment applied to most TDS sections.

Section 194H covers general commission and brokerage at 2% above ₹20,000. Section 194D covers insurance commission (2% for individuals) above ₹20,000 and must be used instead of 194H for insurance agents. Section 194J covers professional and technical fees — 10% for professional services and 2% for technical services — above ₹50,000. Commission that is really a professional fee falls under 194J.

No. Insurance commission paid to agents is specifically covered under Section 194D, not Section 194H. Section 194D applies at 2% for resident individual agents (higher for non-individual payees) once the aggregate crosses ₹20,000 in the year. Using 194H for insurance commission is a common classification error.

No. Section 194H applies only to resident payees. Commission or brokerage paid to a non-resident is governed by Section 195, at the rate in force or the applicable Double Taxation Avoidance Agreement (DTAA) rate, subject to the nature of the payment and whether income accrues in India.

Section 194M applies when an individual or HUF who is not required to deduct TDS under 194H (i.e. below the Section 44AB audit limit) pays commission or brokerage exceeding ₹50 lakh in aggregate during the year. The rate is 2% and tax is deposited using PAN via Form 26QD — no TAN is needed. It ensures large payments by small deductors are still captured.

194H TDS must be deposited by the 7th of the following month, except for March deductions which are due by 30 April. The quarterly TDS return is Form 26Q, due by the 31st of the month following the quarter (Q4 by 31 May). Form 16A (TDS certificate) must be issued to the payee within 15 days of the 26Q due date.

The payee can view 194H TDS deducted in Form 26AS and the Annual Information Statement (AIS), and claim it as a credit against tax liability while filing the income-tax return. The TDS must be reflected against the payee's PAN, so it is important the deductor quotes the correct PAN in the Form 26Q return.

The Income-tax Act 2025, effective from 1 April 2026 (AY 2026-27), re-enacts Section 194H as Section 393(1), Sl. No. 1(ii). The 2% rate and the ₹20,000 threshold are carried forward unchanged. For search and practical purposes "Section 194H" remains the reference; the new number is only a renumbering, not a change in the tax treatment.

Failure to deduct or deposit 194H TDS attracts interest at 1% per month for non-deduction and 1.5% per month for late deposit, plus disallowance of 30% of the expense under Section 40(a)(ia). Late filing of Form 26Q attracts a fee of ₹200 per day under Section 234E, and penalties may apply under Sections 271H and 271C.