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—section-194h-tds-commission-brokerage-india [2026/07/22 17:47] (current) – created - external edit 127.0.0.1
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 +{{htmlmetatags>metatag-description=(Section 194H TDS on commission and brokerage is now 2 percent from 1 October 2024 and the yearly no-deduction limit rose to Rs 20000 from 1 April 2025.)&metatag-keywords=(section 194H, TDS on commission, TDS on brokerage, 194H rate 2 percent)&metatag-robots=(index,follow)&metatag-og:title=(Section 194H: TDS on Commission and Brokerage Explained)&metatag-og:description=(Section 194H TDS on commission and brokerage is now 2 percent from 1 October 2024 and the yearly no-deduction limit rose to Rs 20000 from 1 April 2025.)&metatag-og:type=(article)}}
 +
 +====== Section 194H: TDS on Commission and Brokerage Explained ======
 +
 +
 +{{ :social:auto:section-194h-tds-commission-brokerage-india.png?direct&1200 |Section 194H: TDS on Commission and Brokerage Explained — RTI Wiki}}
 +
 +If your business pays a sales agent, a property broker or a recovery agent in India, Section 194H of the Income-tax Act, 1961 requires you to deduct TDS before you release the money. Two recent changes matter most: the rate fell from 5 percent to 2 percent on 1 October 2024, and the yearly no-deduction limit rose from ₹15,000 to ₹20,000 on 1 April 2025. This guide gives you the table, the math and the exceptions.
 +
 +<WRAP info>
 +**Quick Reply:** Deduct TDS at **2 percent** on commission or brokerage paid to a resident (5 percent for payments made before 1 October 2024). **No TDS** if the total you pay one person in the financial year stays at or below **₹20,000** (the limit was ₹15,000 up to 31 March 2025). If the payee gives no PAN, deduct **20 percent** under section 206AA. No surcharge or cess is added.
 +</WRAP>
 +
 +===== The rate and threshold at a glance =====
 +
 +The two changes took effect on different dates, so read the table carefully. The rate cut landed in the middle of FY 2024-25, while the higher threshold starts cleanly from FY 2025-26.
 +
 +^ What changed ^ Old position ^ New position ^ Effective from ^
 +| TDS rate on commission or brokerage | 5 percent | 2 percent | 1 October 2024 |
 +| Yearly no-deduction limit (per payee) | ₹15,000 | ₹20,000 | 1 April 2025 |
 +| Rate if payee gives no PAN | 20 percent | 20 percent | Unchanged (section 206AA) |
 +| Surcharge or cess on the TDS | None | None | Unchanged |
 +
 +So a single commission payment made on 20 September 2024 attracted 5 percent, while the same payment on 20 October 2024 attracted only 2 percent. For the threshold, what counts is the total paid to one person across the whole financial year, not each separate bill.
 +
 +===== A worked example: Meera Agencies and its sales agent =====
 +
 +Meera Agencies Pvt Ltd hires Rohan Verma, a resident sales agent, on commission. Over FY 2025-26 it pays him commission as follows.
 +
 +^ Quarter ^ Commission paid ^ Running total ^ TDS action ^
 +| Apr to Jun 2025 | ₹8,000 | ₹8,000 | Below ₹20,000, no TDS yet |
 +| Jul to Sep 2025 | ₹9,000 | ₹17,000 | Still at or below ₹20,000, no TDS yet |
 +| Oct to Dec 2025 | ₹10,000 | ₹27,000 | Crosses ₹20,000, deduct now |
 +
 +Once the running total crosses ₹20,000, Meera Agencies must deduct TDS on the **whole** commission, not just the part above the limit. In the third quarter the total reaches ₹27,000, so the company deducts 2 percent of ₹27,000, which is **₹540**, and pays Rohan the balance. On later commission in the same year it keeps deducting 2 percent on each payment.
 +
 +**The no-PAN case.** Suppose Rohan never shares a valid PAN. Then section 206AA applies and the rate becomes 20 percent. On the ₹27,000 total, the deduction jumps to **₹5,400** instead of ₹540. Always collect the payee PAN before you pay, because the gap is ten times larger.
 +
 +===== Who must deduct TDS under Section 194H =====
 +
 +Any person paying commission or brokerage to a resident has to deduct, with one carve-out for small payers.
 +
 +  - **Companies, firms, LLPs and trusts** paying commission or brokerage must deduct, whatever their size.
 +  - **An individual or HUF** must deduct only if their accounts were liable to audit under section 44AB in the **preceding** financial year. A small individual payer whose books were not under audit need not deduct.
 +  - Deduct at the **earlier** of the time you credit the commission in your books or the time you actually pay it.
 +  - Deposit the TDS with the government and report it in your quarterly TDS return, so the agent can claim the credit when filing returns.
 +
 +If you receive commission and TDS is cut from it, that amount shows in your Form 26AS and Annual Information Statement. You then claim it as tax already paid. If you change jobs or roles mid-year and juggle multiple income slips, our guide on [[https://righttoinformation.wiki/two-form-16-job-change-tds-itr-india|two Form 16s and TDS]] explains how to reconcile every deduction.
 +
 +===== What is "commission or brokerage" =====
 +
 +For Section 194H, commission or brokerage means any payment received, directly or indirectly, by a person acting on behalf of another, for services rendered (not professional services) in the course of buying or selling goods, or in relation to any transaction relating to any asset, valuable article or thing. Plain examples are dealer commission, agency commission, recovery-agent fees and property brokerage.
 +
 +===== Payments that Section 194H does NOT cover =====
 +
 +Several payments look like commission but fall outside this section.
 +
 +  - **Insurance commission** is covered by **section 194D**, not 194H.
 +  - **Brokerage or commission on the sale or purchase of securities** is excluded.
 +  - **Payments by television channels or newspaper companies to advertising agencies** for booking or canvassing advertisements are excluded.
 +  - **Turnover commission** payable by the Reserve Bank of India to its agency banks is excluded.
 +
 +Because these have their own rules, do not apply the 2 percent rate to them by default. When in doubt about which TDS section governs a payment, confirm the head before you deduct. For a wider view of how deductions feed into your return and which tax regime you file under, see [[https://righttoinformation.wiki/switch-tax-regime-while-filing-itr-form-10iea-india|switch tax regime]] and the wider [[https://righttoinformation.wiki/|RTI Wiki]] library.
 +
 +===== A note on the new Income-tax Act, 2025 =====
 +
 +The figures above are the current law under the Income-tax Act, 1961, which governs the returns you file now. The Income-tax Act, 2025 re-codifies these provisions and applies from FY 2026-27 onward. The 2 percent rate, the ₹20,000 limit and the 20 percent no-PAN rule remain the position you work with for FY 2025-26. For a citizen-friendly walk-through of how TDS fits the bigger filing picture, see [[https://righttoinformation.wiki/book|The RTI Playbook]].
 +
 +===== Frequently asked questions =====
 +
 +==== Is the Section 194H rate 2 percent or 5 percent now? ====
 +It is 2 percent for commission or brokerage credited or paid on or after 1 October 2024. Payments made before that date were at 5 percent. The change applies inside FY 2024-25, so check the date of each payment.
 +
 +==== At what amount does TDS under 194H start? ====
 +No TDS is needed if the total commission or brokerage you pay one person in the financial year stays at or below ₹20,000 from 1 April 2025. The earlier limit was ₹15,000 up to 31 March 2025. Once you cross the limit, deduct on the whole amount.
 +
 +==== What is the TDS rate if the agent has no PAN? ====
 +Section 206AA applies and the rate becomes 20 percent. Collect a valid PAN before paying, because the deduction is far higher without it.
 +
 +==== Does an individual or HUF have to deduct under 194H? ====
 +Only if their accounts were liable to audit under section 44AB in the preceding financial year. A small individual or HUF payer whose books were not under audit is not required to deduct.
 +
 +==== Is insurance commission covered by Section 194H? ====
 +No. Insurance commission is dealt with under section 194D, which is a separate provision with its own rate and limit. Do not apply the 194H rate to it.
 +
 +==== Is surcharge or cess added to 194H TDS? ====
 +No. For a resident payee, you deduct the flat rate with no surcharge and no health and education cess added on top.
 +
 +===== Next steps =====
 +
 +Check the date and PAN on every commission payment, track the running yearly total against ₹20,000, deduct at 2 percent once you cross it, and deposit and report the TDS on time. If TDS was cut from commission you received, match it against your Form 26AS and claim the credit when you file. This article is general information, not tax advice; confirm your specific case with a qualified professional or the official portal.
 +
 +**Sources:** Income-tax Act, 1961, Section 194H and Section 206AA, incometaxindia.gov.in; Finance (No. 2) Act, 2024 (rate cut to 2 percent from 1 October 2024); Finance Act, 2025 (threshold raised to Rs 20,000 from 1 April 2025).
 +
 +===== Related 2025-26 update =====
 +
 +  * [[https://righttoinformation.wiki/tcs-1-percent-luxury-goods-above-10-lakh-india|1% TCS on luxury goods above Rs 10 lakh]]
 +
 +{{tag>tds section commission brokerage explained}}