TDS
TDS on Commission or Brokerage — Section 194H
Section 194H requires 2% TDS on commission or brokerage once the yearly total to that payee exceeds ₹20,000 — raised from ₹15,000, effective 1 April 2025. From FY 2026-27 it's Section 393(1), payment code 1006.
Section 194H covers commission or brokerage payments — to insurance agents, real estate brokers, sales agents, and similar intermediaries paid a percentage or fee for facilitating a transaction. It doesn't cover commission for professional services in a specified profession, which typically falls under Section 194J instead.
The ₹20,000 threshold was raised from ₹15,000 effective 1 April 2025 — a Budget 2025 change aimed at reducing TDS deduction on smaller commission payments.
From FY 2026-27, this is Section 393(1), Table 1, Sl. 1(ii) under the Income-tax Act, 2025, filed against payment code 1006.
Worked example
On a ₹35,000.00 payment at 2%, TDS is ₹700.00 and the net payment is ₹34,300.00. ₹35,000 paid to a real estate broker for closing a deal — since the yearly total to them exceeds ₹20,000, 2% TDS applies to the full amount, not just the excess over ₹20,000.
Frequently asked questions
What's the difference between brokerage and a professional fee?
Commission or brokerage is typically a percentage or fee for facilitating a sale or transaction — insurance, real estate, and sales agency work are common examples. Fees for a specified profession (legal, medical, accountancy, consultancy) fall under Section 194J instead, at a different rate and threshold.
Is the ₹20,000 threshold tested per invoice or per year?
Per financial year, per payee, on an aggregate basis. Several smaller commission payments to the same agent that add up past ₹20,000 in the year trigger TDS from that point.
What if the agent hasn't furnished a PAN?
Section 206AA overrides the 2% rate with a flat 20% instead — there's no special lower no-PAN rate for this section, unlike 194Q or 194O.