TDS on Commission & Brokerage: Section 194H
Once payments to one payee cross ₹20,000 in a financial year, 2% comes off before the money moves. Here's the whole rule, with a calculator.
The rate right now · TY 2026-27
| Rate | 2% Commission or brokerage |
|---|---|
| Annual threshold | ₹20,000 per payee, per financial yearRate cut from 5% to 2% on 1-10-2024; threshold raised to ₹20,000 by Finance Act 2025. |
| Effective from | 1 April 2025 |
| Who deducts | Any person (other than individuals/HUF not under audit) paying commission or brokerage to a resident. |
| Who's covered | Agents, brokers, aggregator commissions (not insurance commission, which is old Sec 194D). |
| Under the Act 2025 | Commission TDS is consolidated into the Section 393 payment-code table of the 2025 Act. |
Rates per Section 194H, Income-tax Act 1961, as amended by the Finance Act, 2025 · verified 1 July 2026
Work out the TDS on a payment
TDS to deduct at 2%
₹2,400
The split
| Payment for the year | ₹1,20,000 |
| TDS @ 2% | − ₹2,400 |
| Net receipt | ₹1,17,600 |
Once the year's total crosses the threshold, TDS applies to the whole amount, not just the part above it. Without the payee's PAN, deduction jumps to 20% under the higher-of rule. Rate cut from 5% to 2% on 1-10-2024; threshold raised to ₹20,000 by Finance Act 2025. Runs in your browser; nothing is stored.
What changed
As of 1 April 2025, the rate is down from 5% to 2% and the annual threshold is up from ₹15,000 to ₹20,000. Rate cut from 5% to 2% on 1-10-2024; threshold raised to ₹20,000 by Finance Act 2025. Below the threshold nothing is deducted; cross it and TDS applies to the whole amount, not just the excess.
Rate history
| Period | Rate | Threshold | Set by |
|---|---|---|---|
| 1 Jun 2016 – 30 Sep 2024 | 5%Commission or brokerage | ₹15,000 | Finance Act, 2016† |
| From 1 Apr 2025Current | 2%Commission or brokerage | ₹20,000 | Finance Act, 2025† |
Effective-dated from Finance Acts as notified in the Gazette of India · sources below
How Section 194H TDS works
TDS flips the collection point. Instead of the person earning the money paying tax months later, the payer holds back 2% at the moment of payment and deposits it with the government against the payee's PAN. The payee sees that credit in their Form 26AS and settles only the balance when they file. Here's how that plays out under Section 194H:
- Who deducts. Any person (other than individuals/HUF not under audit) paying commission or brokerage to a resident.
- Who's on the receiving end. Agents, brokers, aggregator commissions (not insurance commission, which is old Sec 194D).
- When it triggers. At credit or payment, whichever comes first. Once the year's running total for a payee crosses ₹20,000, tax comes off the whole amount, not just the part above the line.
- Deposit by the 7th. Tax deducted in a month must reach the government by the 7th of the next month, through challan ITNS-281. March deductions get until 30 April.
- Report and certify. Non-salary deductions go into the quarterly Form 26Q return, and the payee gets a Form 16A certificate to match against their Form 26AS and AIS.
The section runs both ways. If you're the one being paid, this is why your money arrives 2% light. The deduction isn't extra tax, it's an advance against your final bill. Check your Form 26AS each quarter and claim the credit in your return; it's your money, already sitting with the government.
Where Section 194H trips people up
- BSNL/MTNL franchise commissions exempt.
- No PAN → 20%.
Sources
- Finance Act, 2025†Official text (CBDT) · archived copy
- Finance Act, 2016†Official text (CBDT) · archived copy
† pending CA verification against the Finance Act 2025 text.
Section 194H: questions people actually ask
What is the TDS rate on commission in TY 2026-27?
2% above ₹20,000 per year. It was 5% until 30 September 2024.