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TDS on Commission and Brokerage under Section 194H: What Changes for FY 2025–26?

If you’re running a business or practicing a profession where commissions and brokerage payments are part of your transactions, it’s crucial to stay updated on how tax deductions work under Section 194H. The latest amendments under FY 2025–26, following the Union Budget 2024, bring in a few significant changes—both in rates and thresholds.

What is Section 194H All About?

Section 194H of the Income Tax Act requires TDS (Tax Deducted at Source) to be deducted on payments made to residents by way of commission or brokerage.

In simple terms, if you’re paying someone a fee for arranging a deal, facilitating a sale, or acting as an intermediary, you might need to deduct TDS before making that payment.

This applies only to non-salaried commissions and excludes insurance commissions, which fall under Section 194D.

FY 2025–26: What’s Changed?

TDS Rates

Period	TDS Rate
Up to September 30, 2024	5%
From October 1, 2024 onwards	2% (reduced rate as per Budget 2024)
If PAN is not provided	20% (penal rate)

Threshold Limits for Deduction

Up to March 31, 2025 – TDS applies if payments exceed ₹15,000 per payee in a financial year.
From April 1, 2025 – This threshold increases to ₹20,000.

Who Needs to Deduct TDS?

If you're:

A company, partnership, LLP, or other business entity making commission/brokerage payments above the threshold, or
An individual or HUF with:
- Business turnover exceeding ₹1 crore, or
- Professional receipts over ₹50 lakh in the previous year,

What Kind of Payments Are Covered?

Here’s what typically qualifies:

Commission – Paid for services as an agent or middleman (sales, marketing, real estate, finance).
Brokerage – Paid for arranging deals (stock trades, goods sales, property transactions).

These payments are covered only when made to a resident and not related to securities or professional services.

What’s Exempt from 194H?

TDS is not applicable in the following scenarios:

Commission/brokerage paid by RBI to banks/financial institutions.
Payments to insurance underwriters or loan facilitators.
Brokerage on public offers or stock exchange transactions.
Commission to LIC agents or cooperative societies.
Payments to notified financial corporations.
Interest income (e.g., from savings, NSC, KVP, NRE).
Payments to BSNL/MTNL PCO franchisees.
Institutions specifically exempted by the Central Government.
Interest on compensation from Motor Accident Claims Tribunals.

When to Deduct TDS?

TDS must be deducted at the earlier of the following:

When credited to the payee’s account (even if it’s a suspense or intermediary account).
When paid – whether in cash, cheque, draft, or any other mode.

How to Deposit TDS?

By 7th of the following month in which the deduction is made.
Exception: For deductions made in March, the due date is April 30 of the next financial year.

Also, don’t forget:

File TDS return (Form 26Q) every quarter.
Issue Form 16A to the payee within the prescribed time.

Want Lower or Nil TDS? Here's How

If the recipient feels that their total income won’t attract much tax—or any tax at all—they can apply for a lower or NIL TDS certificate using Form 13 under Section 197.

If the Assessing Officer grants approval, a certificate will be issued with a specified rate or exemption.

Compliance Checklist for FY 2025–26

For Deductors:

Check if Section 194H applies to you.
Monitor cumulative payments per payee.
Deduct TDS at the correct rate and time.
Deposit TDS within due dates.
File Form 26Q quarterly.
Hand over Form 16A to the recipient.

For Payees:

Track your Form 26AS for TDS credit.
Apply for lower/NIL TDS where eligible.
Claim TDS during return filing or apply for refund, if over-deducted.

Summary Table – Section 194H at a Glance

Period	TDS Rate	Threshold	Rate without PAN
Up to Sep 30, 2024	5%	₹15,000	20%
Oct 1, 2024 – Mar 31, 2025	2%	₹15,000	20%
From Apr 1, 2025	2%	₹20,000	20%

Final Thoughts

With the revised threshold and reduced TDS rate, FY 2025–26 makes it easier for businesses and professionals to comply with Section 194H. Still, timely deduction, accurate filing, and record-keeping remain critical. Whether you're deducting or receiving, make sure you're on the right side of the law—and keep an eye out for those exceptions that could save you both time and money.