TDS on commission refers to the tax deducted by the payer before making commission payments to an agent, broker, or intermediary.
The recipient can claim credit for the deducted TDS while filing the ITR.
Applicable Rates and Limits
For the Financial Year (FY) 2025-26, the Tax Deducted at Source (TDS) rates and threshold limits for commissions under Sections 194D, 194G, and 194H of the Income Tax Act have been updated as follows:
Section 194D: Insurance Commission
Threshold Limit: Increased from ₹15,000 to ₹20,000. TDS is applicable if the total insurance commission paid or credited exceeds ₹20,000 in a financial year.
TDS Rate: Reduced from 5% to 2%.
Section 194G: Commission on Sale of Lottery Tickets
Threshold Limit: Increased from ₹15,000 to ₹20,000. TDS is applicable if the commission on lottery ticket sales exceeds ₹20,000 in a financial year.
TDS Rate: Reduced from 5% to 2%.
Section 194H: Commission or Brokerage
Threshold Limit: Increased from ₹15,000 to ₹20,000. TDS is applicable if the total commission or brokerage paid exceeds ₹20,000 in a financial year.
TDS Rate: Reduced from 5% to 2%.
Key Points
Applicability
Section 194H applies to any person, other than an individual or a Hindu Undivided Family (HUF), who is responsible for paying, to a resident, any income by way of commission or brokerage. However, individuals or HUFs are also liable to deduct TDS if they were liable to audit under Section 44AB in the preceding financial year.
Definition
The term 'commission or brokerage' includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling goods or in relation to any transaction relating to any asset, valuable article, or thing, other than securities.
Non-applicability
No TDS is required if the amount of commission or brokerage does not exceed the specified threshold limit during the financial year.
PAN Requirement
If the deductee (the recipient of the commission or brokerage) does not furnish their Permanent Account Number (PAN), TDS is to be deducted at the higher rate of 20%.
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