If your business pays commission — whether to agents, brokers, or intermediaries —
TDS compliance is something you simply can’t ignore.
Every year, we see businesses either:
• deduct TDS incorrectly, or
• miss it altogether and face notices later
So let’s break this down in a simple, practical way for FY 2026–27.
What is TDS on Commission?
TDS on commission is governed by Section 194H of the Income-tax Act, 1961.
In simple terms, if you are paying someone commission or brokerage, you are required to
deduct TDS before making the payment.
Applicable TDS Rate for FY 2026–27
For FY 2026–27, the applicable rate is:
• 2%TDS on commission or brokerage
However:
• If PAN is not provided → 20% TDS
In certain cases (as per government relaxations/updates), rates may change
temporarily — always check latest notifications
Threshold Limit
TDS under Section 194H applies only if:
• Total commission paid during the year exceeds ₹20,000
If it’s below this limit → no TDS required
What qualifies as “commission”?
This is where most confusion happens.
Commission generally includes payments made to:
• Sales agents
• Brokers
• Marketing intermediaries
• Channel partners
Basically, if someone is earning a percentage or incentive for facilitating a
transaction, it likely falls under commission.
When should TDS be deducted?
TDS must be deducted at the earlier of:
• At the time of credit of commission (even if not paid), OR
• At the time of actual payment
This is a common mistake — many businesses wait until payment, but credit in books
also triggers TDS.
Example (Simple understanding)
Let’s say:
• You pay an agent ₹50,000 as commission
Then:
• TDS @ 2% = ₹1,000
• You pay ₹49,000 to the agent
• ₹1,000 is deposited with the government
Due Dates You Should Not Miss (FY
2026–27)
TDS Deposit
• By 7th of next month
• For March →
30th April
TDS Return (Form 26Q)
• Quarterly filing is required
Late filing or delay = interest + penalty
Common mistakes we see
From a practical standpoint, these are very common:
• Not deducting TDS on incentives/discount-like commissions
• Ignoring TDS because payment is “informal”
• Deducting late (after payment)
• Not depositing TDS on time
• Missing PAN → leading to higher TDS liability
Special situations to watch
Some cases need extra attention:
• Commission vs professional fees (194H vs 194J confusion)
• Discounts vs commission (especially in trade setups)
• Foreign payments (different TDS provisions apply)
If you’re unsure, it’s better to classify correctly upfront than fix it later.
Why proper TDS compliance matters
Many businesses underestimate this, but TDS defaults can lead to:
• Disallowance of expense under income tax
• Interest and penalties
• Notices from the department
• Increased scrutiny in assessments
Final thoughts
TDS on commission may look simple, but in practice, small errors can create bigger
issues later.
The key is:
• Identify applicable payments correctly
• Deduct on time
• Deposit and file returns properly
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