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.
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.
| 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. |
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.
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.