Income Tax

TDS on Commission and Brokerage for Sales Teams

Finin2min Tax Desk·June 2026·7 min readSECTION 194H

Commission and brokerage are high-risk because they sit between sales, payroll and vendor payable processes. A company may call it incentive, referral fee, commission, success fee or brokerage — the name is less important than the legal character of the payment.

For broader context, see the Income Tax and Salary Hub.

What finance should classify first

Before applying TDS, identify whether the recipient is an employee, agent, dealer, channel partner, broker or independent professional. Employee incentives usually sit in payroll, while commission/brokerage to resident non-employees is reviewed under the commission/brokerage TDS framework.

Use the Dividend Income Tax and TDS Credit Calculator to apply these points to your figures or facts.

Rate and threshold table

Item	Official position to verify	Finance-team control
Rate	Official TDS rate table shows Section 194H commission or brokerage at 2%.	Rate-tag commission vendors separately from professional vendors.
Threshold	Official threshold pages show no TDS if commission/brokerage paid or payable during the year does not exceed ₹20,000.	Track vendor-wise annual commission.
PAN	Higher deduction may apply if PAN is not furnished/validated.	Block payment release until PAN is validated.
Employee incentive	Payroll TDS route, not vendor TDS.	Separate employee code from vendor code.

For the connected rule, example or next step, see Variable Pay and Sales Incentive Payroll: Accrual, TDS and Clawback Controls.

Common cases

Referral fee to non-employee influencer or partner.
Brokerage to property/insurance/business brokers, subject to specific facts.
Dealer incentive where invoice and relationship need careful reading.
Sales-team employee variable pay, usually payroll.
Channel-partner success fee after deal closure.

Evidence file

Keep agreement, invoice/credit note, computation of commission, approval note, PAN, TDS working and payment evidence. For high-value arrangements, document why the payment is commission/brokerage and not salary, professional fee or discount.

Official Sources Used

This Finin2min article is drafted only from official/government source material. Re-check the live source before publishing if the law, form, threshold, section mapping or portal workflow has been updated.

For the connected rule, example or next step, see Professional Fees TDS: 10% vs 2% and ₹50,000 Threshold.

FAQs

Is sales incentive always Section 194H?⌄

No. Employee incentive is usually salary. Commission to non-employees may fall under commission/brokerage rules depending on facts.

What is the current official threshold to verify?⌄

The official 2026 threshold pages show ₹20,000 for commission/brokerage, but the live official table should be checked before filing.

Should commission be tracked vendor-wise?⌄

Yes. The threshold is not a per-invoice convenience test; finance teams should track annual vendor-wise payments.

📝

Keep a source-backed tax control fileUse this article with your TDS/TCS register, AIS/26AS download and official portal acknowledgement before filing or responding.

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Source and review trail

Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.

Primary category: Income Tax
Official starting point: www.incometax.gov.in

Page source links

For the connected rule, example or next step, see Commission Income Tax Treatment and TDS FY 2026-27.