TDS on Commission & Brokerage —
Section 194H
The current 2% TDS rate under Section 194H, the ₹20,000 annual threshold, who must deduct, when to deduct, and how commission differs from insurance (194D) and professional fees (194J) for FY 2025-26.
Section 194H requires TDS on commission or brokerage paid to a resident. The rate is 2% — reduced from 5% with effect from 1 October 2024. No TDS is due unless the aggregate commission to a person exceeds ₹20,000 in the financial year (raised from ₹15,000 by Budget 2025, effective 1 April 2025). If the payee has no PAN, deduct at 20% under Section 206AA. It does not cover salary commission (192), insurance commission (194D) or professional fees (194J).
Section 194H — TDS Rate & Threshold
The current TDS rate and threshold on commission and brokerage for FY 2025-26. TDS is deducted on the commission amount, and where GST is shown separately, on the value excluding GST. See the full TDS rate chart 2025-26.
| Particulars | Detail | Rate / Limit |
|---|---|---|
| TDS rate on commission / brokerage | Resident payee | 2% |
| Rate before 1 Oct 2024 | Historic | 5% |
| Annual threshold (w.e.f. 1 Apr 2025) | Aggregate in FY | ₹20,000 |
| Payee has no PAN (s.206AA) | Higher of 2% or 20% | 20% |
| Time of deduction | Credit or payment, whichever earlier | — |
| TDS return / certificate | Quarterly | 26Q / 16A |
No surcharge or cess on TDS for resident payees. Section 206AB (higher rate for non-filers) was omitted w.e.f. 1 April 2025, so no return-filing check is needed.
Commission credited or paid up to 30 September 2024 attracts 5%; from 1 October 2024 onward it is 2%. If you booked a payable in September but paid in October, TDS follows the earlier of credit or payment — so a September credit is still 5%. Using the wrong rate creates a short-deduction demand on TRACES.
What Commission Is Covered Under 194H?
Section 194H covers any payment received or receivable, directly or indirectly, by a person acting on behalf of another for services rendered (other than professional services) or for any services in the course of buying or selling of goods, or in relation to any transaction relating to any asset, valuable article or thing.
| Type of commission / brokerage | Under 194H? | Notes |
|---|---|---|
| Real-estate broker commission | Yes | Builder / developer pays broker |
| Sub-broker / trading commission | Yes | Shares, commodities |
| Distributor / channel-partner commission | Yes | FMCG, pharma, telecom |
| Referral / lead-generation fee | Yes | If in the nature of agency commission |
| Travel-agent commission | Yes | On ticket / booking |
| Salary commission to employees | No · 192 | Part of salary — TDS u/s 192 |
| Insurance-agent commission | No · 194D | Separate section for insurers |
| Professional / technical fees | No · 194J | CA, legal, consultancy — 10% / 2% |
| Commission to a non-resident | No · 195 | Cross-border — Section 195 + DTAA |
Bank / merchant charges, and commission retained by a bank on card transactions, are outside 194H. Turnover commission is not "brokerage".
Not sure if a payout is commission (194H) or professional fee (194J)? Get it classified before you deduct.
Talk to a TDS Expert →Who Must Deduct TDS Under Section 194H?
Any person (other than an individual or HUF) paying commission or brokerage to a resident must deduct TDS. An individual or HUF deducts only if their books were subject to tax audit under Section 44AB in the preceding financial year. There is no requirement to deduct on payments made for wholly personal purposes.
2% Broker commission — ₹1,00,000
20% No-PAN payee — ₹1,00,000
- Obtain TAN before deducting
- Collect the payee's PAN (else 20%)
- Deduct at credit or payment, whichever is earlier
- Deposit challan by the 7th of the next month
- File quarterly Form 26Q
- Issue Form 16A to the recipient
Section 206AB — the higher-rate deduction for payees who had not filed their income-tax returns — was omitted with effect from 1 April 2025. You no longer run a compliance-status check on each commission recipient; only the Section 206AA rate (20%) for a missing PAN survives. Missing deduction still triggers 30% disallowance u/s 40(a)(ia) and interest u/s 201.
File your Form 26Q and issue Form 16A correctly and on time.
Get TDS Return Filing →194H vs 194D vs 194J — Which Applies?
Commission is easy to confuse with insurance commission and professional fees. Using the wrong section changes the rate and threshold and can trigger a short-deduction demand. Recipients reconcile their TDS in Form 26AS before filing their income-tax return.
| Section | Payment | Rate | Threshold (FY) |
|---|---|---|---|
| 194H | Commission / brokerage | 2% | ₹20,000 |
| 194D | Insurance commission | 2% / 10% | ₹20,000 |
| 194J | Professional / technical fees | 10% / 2% | ₹30,000 |
| 192 | Commission as part of salary | Slab | — |
| 195 | Commission to a non-resident | Per DTAA | — |
194D insurance commission was also cut to 2% (individual) / 10% (company) with the threshold raised to ₹20,000 from 1 Apr 2025.
Under the Income-tax Act, 2025 (applicable from AY 2026-27), the commission-and-brokerage TDS provision is renumbered as Section 393. The substance — the 2% rate and ₹20,000 threshold — is unchanged. The familiar "194H" reference remains valid for FY 2025-26 and is what most deductors still use.
A recipient whose commission income is below the taxable limit can apply for a lower or nil deduction certificate under Section 197 (Form 13 on TRACES) and give it to the payer, who then deducts at the certified rate.
TDS on Commission — Frequently Asked Questions
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