TDS on Commission under Section 194H of the Income Tax Act (FY 2025-26)

Section 194H governs TDS on one of the most commonly encountered payment types in business — commission and brokerage payments to agents, dealers, and intermediaries. The recent rate reduction and threshold increase have genuinely simplified compliance for many businesses, but understanding exactly what qualifies as commission, what is exempt, and the correct deposit timeline remains essential for accurate compliance.

This page covers:

• What Section 194H covers
• Key provisions for FY 2025-26 — rate and threshold changes
• What qualifies as commission and brokerage
• Exemptions from Section 194H
• Who must deduct TDS
• TDS deposit and return filing due dates
• How to calculate and deduct TDS on commission
• How to apply for lower or nil TDS certificate

Section 194H deals with the deduction of TDS on payments classified as commission or brokerage. According to this section, anyone making such payments — except individuals or Hindu Undivided Families (HUFs) who are not subject to tax audit — must deduct TDS if the payment exceeds the prescribed threshold in a financial year.

For the purpose of TDS, commission or brokerage includes any payment received or receivable, directly or indirectly, for services rendered (excluding professional services) or for any services in the course of buying or selling goods. This can include commission payments made to agents, brokers, or any other person acting on behalf of someone else.

The revised 2% TDS rate was introduced in Union Budget 2024, while the enhanced Rs. 20,000 threshold was announced in Union Budget 2025 — together making compliance meaningfully easier for businesses and agents dealing in smaller-value commission transactions.

• General services: Payments made for services rendered in return for a commission, excluding professional or technical services.
• Product transactions: Commission earned for facilitating the sale or purchase of goods, involving agents or intermediaries.
• Asset-related deals: Commission or brokerage on deals involving valuable items or assets, except those involving securities like shares or bonds.
• Brokerage meaning: Payment made to a broker for connecting buyers and sellers — a broker acts as a middle person in sectors like property, insurance, stocks, or commodity markets, and their fee is called brokerage or commission.

Some payments are exempt from Section 194H:

• Commissions paid by the Reserve Bank of India
• Payments to underwriters of loans or insurance
• Brokerage fees linked to public share offerings
• Brokerage on stock market trades involving listed securities
• Commissions related to LIC or co-operative society investments
• Interest earned on savings accounts, NSC, Kisan Vikas Patra, or Indira Vikas Patra
• Interest from NRE accounts
• Commissions to franchisees running public call offices for BSNL/MTNL
• Insurance commission (falls under Section 194D instead)
• Commission paid to employees (taxed under Section 192 as salary instead)

This section applies to any resident person or entity, including individuals and Hindu Undivided Families (HUFs), whose sales, turnover, or gross receipts exceeded Rs. 1 crore for business or Rs. 50 lakh for profession in the preceding financial year. Firms, companies, and partnership firms are also required to deduct TDS if they make such payments.

TDS must be deducted at the time of credit to the payee's account or at the time of payment, whichever is earlier — regardless of the payment mode (cash, cheque, DD, or any other mode).

TDS deposit due date

• For deductions April 2025 to February 2026: on or before the 7th of the following month
• For deductions in March 2026: on or before 30th April 2026
   

TDS return (Form 26Q) filing due date

• Q1 (Apr–Jun 2025): 31st July 2025
• Q2 (Jul–Sep 2025): 31st October 2025
• Q3 (Oct–Dec 2025): 31st January 2026
• Q4 (Jan–Mar 2026): 31st May 2026

1. Identify the total commission payable: Determine the total commission or brokerage amount payable to the recipient
2. Apply the threshold limit: Check if the total commission exceeds Rs. 20,000 in a financial year
3. Calculate TDS: If it exceeds the threshold, apply the 2% TDS rate to the total commission amount
4. Deduct TDS: Deduct the calculated amount from the commission payable and pay the net amount to the recipient
5. Deposit TDS: Deposit with the government by the 7th of the following month
6. Issue TDS certificate: Provide Form 16A to the recipient as proof of deduction

A person receiving commission or brokerage can apply to the Income Tax Assessing Officer (AO) for a certificate allowing TDS at a lower rate or no TDS at all. To apply, submit:

• Full name and address of the deductee
• PAN
• Income details for the last three financial years
• Tax paid during the last three financial years
• Purpose of the payment
• Estimated income for the current financial year
• Tax already paid in the current financial year

If approved, the certificate specifies a lower TDS rate, PAN, relevant sections, and financial year — the payer must quote this certificate number correctly and cannot exceed the threshold mentioned in it.

When it comes to real estate transactions, TDS on purchase of property is also applicable. Under Section 194-IA of the Income Tax Act, TDS at 1% is required to be deducted by the buyer on the sale consideration if the property value exceeds Rs. 50 lakh — ensuring the transaction is reported to tax authorities and increasing transparency in real estate deals.

If you are planning to purchase property and need financing, exploring home loan options can help you manage your budget effectively. Bajaj Finance offers competitive interest rates starting from 7.25% p.a.* with flexible repayment tenures up to 32 years. Check your eligibility today.

Understanding TDS on commission is crucial for ensuring compliance with tax regulations and optimising your financial planning. By knowing the current rate, threshold limits, and calculation process, you can effectively manage your finances and avoid legal issues related to non-compliance.