TDS on Commission and Brokerage — Section 194H

Updated: 3 June 2026 | Income-tax Act, 2025 | Effective for Tax Year 2026-27

Section 194H requires TDS at 5% on commission or brokerage paid to a resident person. TDS applies when the aggregate payment exceeds ₹15,000 in a financial year. Covers real estate brokerage, trading commission, distributor fees, and referral fees. Does not cover salary commission (Section 192), professional charges (Section 194J), or insurance agent commission (Section 194D). TDS certificate: Form 16A. Credit in payee's Form 26AS.

5% TDS

Rate under Section 194H — Threshold ₹15,000 per financial year
20% if payee does not furnish PAN. Higher rate under Section 206AB if payee is a non-filer and TDS exceeds ₹50,000.

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Who is NOT required to deduct: Individual or HUF payers are exempt from deducting TDS under 194H — unless their accounts were subject to tax audit under Section 44AB in the immediately preceding financial year. If you are an audited individual/HUF, you must deduct TDS on commission payments.

Section 194H — Key Parameters at a Glance

Parameter	Detail
Applicable Section	Section 194H, Income-tax Act, 2025
TDS Rate	5%
Threshold Limit	₹15,000 aggregate in a financial year
Who Deducts	Any person paying commission/brokerage — except individual/HUF not liable to tax audit
Payee	Resident individuals, firms, companies receiving commission (not NRI)
Time of Deduction	At the time of credit to payee's account or payment, whichever is earlier
TDS Deposit Due Date	7th of following month (April–February); 30 April for March quarter
TDS Return Form	Form 26Q (quarterly)
TDS Certificate	Form 16A (issued quarterly)
No PAN Rate	20% (higher of 5% or 20% as per Section 206AA)

What is Covered Under Section 194H

Type of Commission / Brokerage	Covered by 194H?	Notes
Real estate broker commission	Yes	Paid by builder/developer to broker
Trading commission (shares/commodities)	Yes	Sub-broker commission from broker
Referral fees / lead generation fees	Yes	If in nature of agency commission
Distributor / channel partner commission	Yes	FMCG, pharma, telecom distributors
Travel agent commission	Yes	Commission earned on ticket booking
Mutual fund distributor commission	Yes	Trail/upfront commission from AMC
Salary commission to employees	No — Section 192	Treated as salary, TDS under 192
Insurance agent commission	No — Section 194D	Separate section for insurance agents
Professional fees (CA, lawyer, doctor)	No — Section 194J	Professional services under 194J at 10%
Commission paid to NRI	No — Section 195	Cross-border payments under 195

Comparison: Section 194H vs 194D vs 194J

Parameter	Sec 194H (Commission)	Sec 194D (Insurance)	Sec 194J (Professional)
Payment Type	Commission/brokerage	Insurance commission	Professional/technical fees
TDS Rate	5%	5%	10% (2% for tech services)
Threshold	₹15,000 p.a.	₹15,000 p.a.	₹50,000 p.a.
Who pays	Any person (excl. non-audit indiv/HUF)	Insurance company	Any person (excl. non-audit indiv/HUF)
Examples	Real estate broker, distributor, referral fee	LIC/GIC agent commission	CA fees, legal fees, director fees
TDS Return	Form 26Q	Form 26Q	Form 26Q

Claiming TDS Credit — Payee's Perspective

If your commission income has TDS deducted under Section 194H, here is how to claim credit:

Step 1: Verify the TDS amount in your Form 26AS and AIS on the income tax portal (incometax.gov.in). The credit appears after the deductor files the quarterly TDS return (Form 26Q).

Step 2: Collect Form 16A (TDS certificate) from the deductor. It must be issued within 15 days of the due date of the quarterly return.

Step 3: Declare the commission income under "Income from Business/Profession" or "Income from Other Sources" in your ITR. Claim TDS credit in Schedule TDS2 of the ITR form.

Step 4: If TDS was deducted in excess (because your total income is below the taxable limit), claim a refund. The refund is processed by the income tax department after ITR verification.

Lower or Nil TDS Certificate — Section 197

If your total income is below the taxable limit or you expect your total tax liability to be lower than the TDS that would be deducted, you can apply to your Assessing Officer for a lower/nil TDS certificate under Section 197. Once issued, the certificate is submitted to the deductor, who then deducts TDS at the lower rate or nil rate as specified. Application is made online through the TRACES portal in Form 13.

Frequently Asked Questions

What is the difference between commission and professional fees for TDS purposes?

Commission (Section 194H) and professional fees (Section 194J) are taxed under different TDS sections. Commission is payment for services rendered as an agent or intermediary — e.g., real estate broker, insurance agent, referral fee, distributor. Professional fees cover services of a specialised or technical nature — e.g., legal advice, accounting, engineering consulting, medical services. The TDS rate under 194H is 5%; under 194J it is 10% (2% for technical services). If there is doubt, the nature of the contract determines the applicable section. A general agent/intermediary relationship points to 194H; a specialist providing expertise points to 194J.

Does Section 194H apply to insurance agents — what TDS section covers insurance commission?

Insurance commission to insurance agents is governed by Section 194D, not Section 194H. Section 194D covers commission paid to an insurance agent by an insurance company — TDS at 5% with a threshold of ₹15,000 per year. Section 194H applies to commission paid by any person other than insurance companies for brokerage or agency services. So if a non-insurance business pays a referral fee or commission to someone for bringing in business, Section 194H applies (5%, threshold ₹15,000). Insurance companies deduct TDS under 194D from agents' commission payments.

Does TDS apply to commission paid to a real estate broker?

Yes. Commission paid to a real estate broker is covered under Section 194H — TDS at 5% if the aggregate payment exceeds ₹15,000 in a financial year. The deductor is any person (excluding individual/HUF not subject to tax audit) who pays brokerage or commission to a resident person. For real estate transactions, the builder or developer paying brokerage to a broker must deduct TDS under 194H. An individual seller paying commission to a property dealer is generally not required to deduct TDS unless they are subject to tax audit under Section 44AB. The commission to NRI brokers is covered under Section 195 (not 194H).

What is the TDS rate on commission if the recipient does not have a PAN?

If the commission recipient does not furnish their PAN to the deductor, TDS must be deducted at a higher rate — the higher of: (a) the rate specified in the relevant section (5% for Section 194H), or (b) 20%. So in practice, no-PAN TDS on commission = 20%. Additionally, under the higher TDS provisions applicable to non-filers (Section 206AB), if the payee is a specified person who has not filed ITR for the past 2 years and the TDS amount exceeds ₹50,000, TDS is deducted at twice the normal rate or 5%, whichever is higher. Always collect PAN from commission recipients before making payments.

How does a recipient claim TDS credit deducted on commission under 194H?

A person whose commission income has been subject to TDS under Section 194H can claim credit for the TDS deducted while filing their Income Tax Return. The TDS amount appears in Form 26AS (Annual Tax Statement) and the AIS (Annual Information Statement) of the payee once the deductor has deposited the TDS and filed the TDS return (Form 26Q quarterly). The payee can verify the credit in Form 26AS on the income tax portal. If the deductor has issued Form 16A (TDS certificate for non-salary), the same details apply. If actual TDS credit in 26AS is less than what was deducted, contact the deductor to rectify the TDS return.

TDS Rate Chart Section 194J Professional TDS TDS Return Filing Form 26AS Income Tax Calculator

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