TDS on Commission and Brokerage for Sales Teams
Reviewed by CA Nikhil Gupta · Last reviewed 19 June 2026 · Current framework: Section 194H, Income-tax Act, 1961/2025, as applicable on the review date
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.
Worked example
A channel partner earns ₹6,000 commission in Q1, ₹7,500 in Q2, ₹5,200 in Q3 and ₹4,800 in Q4 from the same company - none of the individual quarterly payments crosses ₹20,000, but the annual total is ₹23,500. Because the threshold is tested on the annual vendor-wise total, not per payment, TDS at 2% applies once the running total crosses ₹20,000 during the year - here, on the Q4 payment that tips the cumulative total over the limit. A finance team tracking only individual invoices would incorrectly conclude no TDS was due all year.
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.
- Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026
- Income Tax Department: TDS rates
- Income Tax Department: Threshold limits under Income-tax Act
- Income Tax Department: Resident benefits allowable — TDS thresholds
- Income Tax Department: Brief on Budget — Finance Act 2025 TDS/TCS changes
- Income Tax Department: Deposit TDS & TCS Online
- Income Tax Department: Higher deduction of tax at source where PAN is not furnished
For the connected rule, example or next step, see Professional Fees TDS: 10% vs 2% and ₹50,000 Threshold.
FAQs
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
See “Official Sources Used” above for the Income-tax Act, TDS/TCS deposit and Section 206AA references used in this article.
For the connected rule, example or next step, see Commission Income Tax Treatment and TDS FY 2026-27.
Primary sources & related provisions
Statutory provisions referenced in this guide: