Section 194H — TDS on
Commission & Brokerage
The current 194H rate and threshold for FY 2025-26, who must deduct, when to deduct, the no-PAN rule and how 194H differs from 194D, 194J and 194M — plus the new Section 393 renumbering.
Section 194H requires TDS at 2% on commission or brokerage paid to a resident, once the aggregate crosses ₹20,000 in a financial year (FY 2025-26). If the payee has no valid PAN, TDS jumps to 20% under Section 206AA. The rate was cut from 5% to 2% from 1 October 2024, and the threshold raised from ₹15,000 to ₹20,000 from 1 April 2025. Insurance commission (194D) and salary commission (192) are outside 194H.
Section 194H — Key Parameters
What 194H taxes, at what rate, and every operational limit for FY 2025-26. TDS is deducted on the gross commission or brokerage, at the earlier of credit or payment.
| Parameter | Details |
|---|---|
| TDS rate (valid PAN) | 2% of gross commission / brokerage |
| Rate without PAN (s.206AA) | 20% |
| Threshold (FY 2025-26) | ₹20,000 per payee per financial year |
| Payments covered | Commission, brokerage, discount / remuneration for agency services |
| Payee | Resident only Non-resident → s.195 |
| Time of deduction | At credit to payee (or suspense a/c) or payment — whichever is earlier |
| Deposit due date | 7th of the following month (March: 30 April) |
| TDS return | Form 26Q (quarterly) |
| TDS certificate | Form 16A within 15 days of the 26Q due date |
| New Act reference | Section 393(1), Sl. 1(ii), Income-tax Act 2025 (from AY 2026-27) |
Rate cut 5% → 2% w.e.f. 1 Oct 2024 (Budget 2024); threshold ₹15,000 → ₹20,000 w.e.f. 1 Apr 2025 (Budget 2025).
Many templates and accounting masters still show 194H at 5%. For any commission credited on or after 1 October 2024 the correct rate is 2% (20% if the payee has no PAN). Over-deducting at 5% forces the payee to claim a refund; under-deducting attracts interest and disallowance under Section 40(a)(ia).
Paying commission or brokerage? Get your 194H deduction and 26Q filing handled by a CA.
Talk to a TDS Expert →Who Must Deduct TDS Under 194H
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 tax-audit limit under Section 44AB (₹1 crore business / ₹50 lakh profession). Companies, firms, LLPs and AoPs must always deduct, regardless of turnover.
- Companies, LLPs, firms & AoPs — always deduct
- Individuals / HUF above the s.44AB audit limit — deduct
- Individuals / HUF below the audit limit — no 194H (see s.194M)
- Deduct only for resident payees (non-residents → s.195)
- Aggregate across the year — ₹20,000 limit is cumulative, not per bill
Worked example — commission of ₹80,000
With valid PAN (2%)
No PAN (20%)
The ₹20,000 threshold is tested on the full-year aggregate. Once total commission to one payee crosses ₹20,000, TDS applies to the entire amount, not only the excess.
194H vs 194D vs 194J vs 194M
Commission-type payments are split across several sections. Picking the wrong one is a common notice trigger.
| Section | Payment | TDS Rate | Threshold / year |
|---|---|---|---|
| 194D | Insurance commission | 2% (5% for non-individuals) | ₹20,000 |
| 194H | General commission / brokerage | 2% | ₹20,000 |
| 194J | Professional / technical fees | 10% prof / 2% tech | ₹50,000 |
| 194M | Commission by individual/HUF below audit limit | 2% | ₹50,00,000 |
| 192 | Commission paid as part of salary | As per slab | Basic exemption |
194J professional-fee threshold raised to ₹50,000 for FY 2025-26 (Budget 2025). 194D non-individual rate remains 10% for some payers — confirm payer type.
What Falls Outside Section 194H
- Insurance commission — deduct under Section 194D, not 194H.
- Commission within salary — taxed under Section 192 as salary.
- Commission to a non-resident — governed by Section 195 (with treaty relief).
- Payments below ₹20,000 aggregate in the year — no deduction.
- Turnover / trade discount on a principal-to-principal sale (not agency) — generally outside 194H.
The Income-tax Act, 2025 (effective 1 April 2026) re-enacts Section 194H as Section 393(1), Sl. No. 1(ii). The 2% rate and ₹20,000 threshold are carried forward unchanged — keep using "194H" as the working reference; the section number is only a renumbering.
File your quarterly Form 26Q correctly and issue Form 16A on time.
File TDS Return →Section 194H — Frequently Asked Questions
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Section 194H — Deduction, 26Q & 16A Sorted
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