TDS on commission is 2% under section 194H, deducted by the business paying an agent or broker once the commission to that person goes above ₹20,000 in FY 2025-26. The rate was 5% before 1 October 2024 and the limit was ₹15,000 before 1 April 2025, so older charts are out of date.
The section covers sales agents, property brokers, travel agents paid by airlines or hotels, and dealers paid a commission by a manufacturer. Two things are kept out: insurance commission, which has its own section 194D, and brokerage on securities. For tax year 2026-27, commission is one of the payments listed in section 393 of the 2025 Act. Other rates are collected in the TDS rate chart.
Quick facts
Rate
2% with PANYearly limit
₹20,000 to one payeeNo PAN
20%Who deducts
Businesses, except individuals and HUFs outside tax auditInsurance commission
Section 194D, not 194HDeposit
By the 7th of the next month; 30 April for MarchTax year 2026-27
Part of section 393, same 2% rate
Commission TDS rate and limit, then and now
| Period | Rate | Yearly threshold |
|---|---|---|
| FY 2024-25, credited before 1 October 2024 | 5% | ₹15,000 |
| FY 2024-25, credited from 1 October 2024 | 2% | ₹15,000 |
| FY 2025-26 | 2% | ₹20,000 |
| Tax year 2026-27 (2025 Act, section 393) | 2% | ₹20,000 |
The threshold is a yearly total per payee. Once commission credited to one agent passes ₹20,000, TDS is due on the full amount, including earlier credits that were below the line. Without a PAN, the rate jumps to 20%.
What counts as commission or brokerage under section 194H of the Income Tax Act
The law reads commission widely: any payment to a person acting for another in buying or selling goods, or in any deal about an asset or valuable thing, or for services in the course of such deals. The key test is an agent acting on behalf of a principal.
- Covered: a sales agent's commission from a manufacturer, a property broker's fee paid by a builder company, a recruiting agent's cut, commission paid by a hotel to a booking agent.
- Usually not covered: a margin earned by a distributor who buys goods outright and resells them at its own risk, because there is no agency.
- Excluded by the law: insurance commission (194D) and brokerage on securities.
Where the person is paid for advice rather than for arranging a deal, look at 194J on professional fees.
Worked example of TDS on commission
A tile maker and its agent. A company pays a commission agent, an individual with PAN, for bringing orders in FY 2025-26.
Credits: ₹12,000 in May, ₹6,000 in August, ₹9,000 in November.
After August the total is ₹18,000, still within ₹20,000, so nothing is deducted.
In November the total reaches ₹27,000. The company deducts 2% of ₹27,000, which is ₹540, from the November credit. The agent is paid ₹8,460 for November.
The ₹540 is deposited by 7 December and reported in the Form 26Q for the third quarter.
A broker on a flat sale. A builder company pays a property broker ₹1,50,000 for finding buyers. TDS at 2% is ₹3,000, and the broker gets ₹1,47,000.
Brokerage, insurance and lottery commission compared
| Payment | Section | Rate | Limit for the year |
|---|---|---|---|
| Commission or brokerage (not securities, not insurance) | 194H | 2% | ₹20,000 |
| Insurance commission to a person other than a company | 194D | 2% | ₹20,000 |
| Insurance commission to a company | 194D | 10% | ₹20,000 |
| Commission on sale of lottery tickets | 194G | 2% | ₹20,000 |
Insurance agents searching for TDS on insurance commission should check the 194D row. The 194H rate does not apply to them.
Who must deduct and when
Every payer other than an individual or HUF deducts, and individuals or HUFs deduct too if their turnover or receipts brought them under a tax audit in the preceding year. An individual outside audit who pays a broker more than ₹50 lakh in a year deducts 2% under section 194M instead.
Tax is due at credit to the agent's account, including a suspense or provision account, or at payment if that comes first. A year-end provision for commission booked on 31 March carries TDS in March, payable by 30 April. Deposit it with Challan 281 and give the agent Form 16A every quarter.
Commission under the Income-tax Act, 2025
For any commission credited or paid from 1 April 2026, the law that applies is the 2025 Act. Commission and brokerage are one item in section 393, at 2% above ₹20,000, and the quarterly return is Form 140 instead of Form 26Q. The word "tax year" replaces "previous year". Commission for FY 2025-26, including a March provision paid later, is still deducted and reported under 194H. A broader view of what moved is on the Income-tax Act, 2025 page.
194H errors and how to correct them
| Problem | Correction |
|---|---|
| Still deducting at 5% | Use 2% for anything credited from 1 October 2024 and fix the rate in the accounting software master |
| Testing each credit against ₹20,000 | Add up all commission to that agent for the year |
| Deducting 194H on insurance commission | Use 194D |
| Skipping TDS on the March provision | Deduct at credit, even if payment is in April |
This is a broad explanation of Indian TDS rules on commission, not advice for a specific deal. Before acting, have a chartered accountant confirm the current law, or verify it on the official tax portal.
Sources we checked
- Income-tax Act, 1961, section 194H
- Income-tax Act, 1961, section 194D
- Income-tax Act, 1961, section 194M
- Income-tax Act, 2025, section 393
Frequently asked questions
What is the 194H TDS rate for FY 2025-26?
It is 2% of the commission or brokerage, with PAN. Without PAN the payer deducts 20%.
Is there a commission TDS limit below which no tax is cut?
Yes. If total commission to one person in FY 2025-26 is ₹20,000 or less, no TDS is needed. Once it goes above ₹20,000, TDS applies on the whole amount.
Does 194H apply to TDS on brokerage paid to a stock broker?
No. Brokerage on securities is kept out of section 194H. Property, travel and goods brokerage are covered.
Is TDS on insurance commission deducted under 194H?
No, insurance commission is under section 194D: 2% for agents other than companies and 10% for companies, above ₹20,000 a year.
Will TDS on commission for FY 2026-27 change?
The 2% rate and ₹20,000 limit carry over for tax year 2026-27. Only the legal reference changes, to section 393 of the new Act, and the quarterly return becomes Form 140.