TDS on Commission w.e.f 01.4.2026 as per New ITR 2026

Last Updated on: April 8, 2026

TDS on Commission w.e.f 01.4.2026 as per New Income Tax Rules 2026

Under the Income-tax Act, 2025 (effective from April 1, 2026), the provisions for Tax Deducted at Source (TDS) on commission and brokerage payments have been consolidated under Section 393(1). [ Refer Section 393 Income Tax Act 2025 Tax to be deducted at source.]

Here are the complete provisions:

1. Insurance Commission (Section 393(1) [Table: Sl. No. 1(i)])

Applicability & Rate: When any person pays remuneration or reward for soliciting or procuring insurance business (including renewal or revival of policies), TDS must be deducted at the “rates in force”.
Threshold Limit: TDS is required if the aggregate payment during the tax year exceeds ₹20,000.
Nil Deduction Declaration: Eligible resident individuals can submit a self-declaration (using the new unified Form No. 121) to the payer to request non-deduction of TDS on insurance commission.

2. General Commission or Brokerage (Section 393(1) [Table: Sl. No. 1(ii)])

Applicability & Rate: When a “specified person” (such as a company, firm, or an individual/HUF subject to tax audit) makes a payment for any other type of commission or brokerage, TDS must be deducted at the rate of 2%.
Threshold Limit: TDS is only required if the aggregate payment during the tax year exceeds ₹20,000.

3. TDS by Individuals/HUFs Not Covered Above (The ₹50 Lakh Rule)

If an Individual or Hindu Undivided Family (HUF) is not required to deduct tax under the general provision above (typically because their business turnover does not subject them to tax audit requirements), they are still liable to deduct TDS if they make substantial commission or brokerage payments under Section 393(1) [Table: Sl. No. 6(ii)].

Applicable Rate: 2%.
Threshold Limit: TDS is required if the aggregate commission or brokerage paid or credited exceeds ₹50,00,000 in a tax year.
Compliance: These deductors do not need to obtain a TAN. They must report and deposit the deducted tax using Schedule C of the new Challan-cum-Statement Form No. 141. The form must be filed and the tax paid electronically within 30 days from the end of the month in which the deduction was made.

4. Definition of Commission or Brokerage

The term “commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person:

For services rendered (not being professional services).
For any services in the course of buying or selling of goods.
In relation to any transaction relating to any asset, valuable article, or thing (not being securities).

5. Exemptions (When TDS is NOT required)

No TDS is required to be deducted on commission or brokerage payable by Bharat Sanchar Nigam Limited (BSNL) or Mahanagar Telephone Nigam Limited (MTNL) to their public call office franchisees.

6. Transition Rules (March-April 2026)

The governing Act for a transaction that spans the transition date depends on the “earlier of the event of credit or payment”.

If the commission is credited or paid on or before March 31, 2026, the TDS obligations fall under the old Income-tax Act, 1961.
If the earlier event of credit or payment occurs on or after April 1, 2026, the deductor must apply the new Act and ensure they quote the correct new section references (e.g., Section 393(1) [Table: Sl. No. 1(ii)]) in their TDS returns, as quoting the old sections will result in system-level validation errors.

7. How to deduct tds on Commission with example

Under the Income-tax Act, 2025, the process and rate for deducting Tax Deducted at Source (TDS) on commission and brokerage depend on the type of payer, the nature of the commission, and the payment amount.

Here is a step-by-step guide on how to deduct TDS on commission, along with practical examples:

1. General Commission or Brokerage (Section 393(1) [Table: Sl. No. 1(ii)]) This applies to standard businesses. If the payer is a “specified person” (e.g., a company, firm, or an individual/HUF subject to a tax audit), they must deduct TDS on general commission or brokerage payments.

Applicable Rate: 2%.
Threshold Limit: TDS must be deducted if the aggregate commission paid or credited during the tax year exceeds ₹20,000.

Example 1: M/s ABC Ltd. (a specified person) pays a sales commission of ₹45,000 to a local agent, Mr. Sharma, during the tax year.

Check Threshold: Since ₹45,000 exceeds the ₹20,000 threshold, TDS is applicable on the entire amount.
Calculation: 2% of ₹45,000 = ₹900.
Net Payment: ABC Ltd. will deduct ₹900 and pay a net amount of ₹44,100 to Mr. Sharma. ABC Ltd. will then deposit the ₹900 with the government using their TAN.

2. High-Value Commission by Individuals/HUFs (Section 393(1) [Table: Sl. No. 6(ii)]) If the payer is an Individual or Hindu Undivided Family (HUF) who is not covered by the general rule above (for example, a salaried person or a small business owner not liable for tax audit), they are still required to deduct TDS on substantial commission or brokerage payments.

Applicable Rate: 2%.
Threshold Limit: TDS is only deducted if the aggregate commission or brokerage exceeds ₹50,00,000 (₹50 Lakhs) in a tax year.
Compliance: These deductors do not need to apply for a TAN. They can deduct the tax and deposit it to the government using their own PAN by filing Schedule C of the unified Challan-cum-Statement Form No. 141.

Example 2: Mr. Gupta, a salaried individual, buys a luxury house and pays a total brokerage of ₹55,00,000 to XYZ Real Estate Brokers during the year.

Check Threshold: Because the payment exceeds the ₹50 Lakh threshold for non-audited individuals, Mr. Gupta must deduct TDS.
Calculation: 2% of ₹55,00,000 = ₹1,10,000.
Net Payment: Mr. Gupta will pay the broker ₹53,90,000. He will then deposit the deducted ₹1,10,000 directly with the Income Tax Department using his PAN via Form 141 (Schedule C) within 30 days from the end of the month in which he deducted the tax.

3. Insurance Commission (Section 393(1) [Table: Sl. No. 1(i)]) If any person makes a payment as remuneration or reward for soliciting or procuring insurance business, they must deduct TDS.

Applicable Rate: At the “rates in force” (as specified by the relevant Finance Act for the year).
Threshold Limit: TDS must be deducted if the aggregate payment during the tax year exceeds ₹20,000.

Crucial Rule: What if the Payee does not provide a PAN? Regardless of the type of commission, if the person receiving the commission fails to furnish their valid Permanent Account Number (PAN) to you, you are legally required to deduct tax at a higher rate of 20%.

For instance, in Example 1, if Mr. Sharma did not give ABC Ltd. his PAN, the company would have to deduct 20% (₹9,000) instead of 2% (₹900).

Exemption: You are not required to deduct TDS on commission or brokerage if the payment is being made by Bharat Sanchar Nigam Limited (BSNL) or Mahanagar Telephone Nigam Limited (MTNL) to their public call office franchisees.

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New Section 393 of Income Tax Act 2025 to Replace Section 194H of Income Tax Act 1961 for TDS on Commission,

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