TDS on Commission and Brokerage in Tax Year 2026-27: Section 393 Rates and Thresholds

What changed from 1 April 2026?

For commission or brokerage credited or paid on or after 1 April 2026, resident-payee withholding is generally governed by section 393 of the Income-tax Act, 2025. The former section 194H of the Income-tax Act, 1961 applied to earlier events, through 31 March 2026. The new Act reorganises TDS provisions into tables; the common commission and brokerage rule appears in section 393(1), Table Serial No. 1(ii).

Tax Year 2026-27 runs from 1 April 2026 to 31 March 2027. Do not apply the new section number to a commission credited or paid before 1 April 2026 merely because the bill or return is processed later. The date of credit or payment, whichever occurs first, generally determines when deduction is due and which law applies.

This guide covers commission and brokerage paid to residents. Payments to non-residents are governed by separate provisions and require a separate review.

Section 393 commission TDS rate and threshold

Under section 393(1), Table Serial No. 1(ii), a specified person paying a resident commission or brokerage other than insurance commission generally deducts tax at 2% when the amount or aggregate amounts exceed ₹20,000 in the tax year. Once the threshold is crossed, deduction applies to the entire amount covered by the provision, not only the excess over ₹20,000.

The ₹20,000 test is an annual aggregate, not a per-invoice allowance. If payments to one resident payee cross the threshold during the year, calculate the deduction on the amount covered by the rule. For example, if a specified person pays a resident broker ₹12,000 in June and ₹10,000 in November, the total is ₹22,000. The threshold is crossed, so TDS is generally calculated on the covered amount, subject to any applicable exception or certificate.

Who is a specified person?

The ₹20,000 commission/brokerage threshold applies when the payer is a “specified person.” Section 402(37) includes governments, local authorities, companies, firms, co-operative societies and certain other listed bodies. It also includes an individual or Hindu undivided family (HUF) whose business turnover or gross receipts exceeded ₹1 crore, or whose professional gross receipts exceeded ₹50 lakh, in the immediately preceding tax year.

Those turnover tests decide whether an individual or HUF is a specified person for the relevant rule. They are not the commission-payment threshold. A payer should document its status based on the prior year’s records before deciding which withholding route applies.

When the separate ₹50 lakh rule may apply

Section 393(1), Table Serial No. 6(ii), is a separate route for certain payments by an individual or HUF who is not required to deduct under the other listed entries, including the specified-person commission rule in Serial No. 1(ii). It covers specified contract work, professional services, and commission or brokerage. If the payer’s aggregate covered payments exceed ₹50 lakh in the tax year, the rate is generally 2%.

This is not a higher threshold for every payer. A company or firm that is a specified person should generally assess ordinary commission or brokerage under Serial No. 1(ii), with the ₹20,000 threshold. An individual or HUF should first determine whether it is a specified person; only if the conditions for the separate route are met should it consider Table Serial No. 6(ii) and the ₹50 lakh threshold.

For payments under this separate individual/HUF route, the statement and deposit process is different from the regular quarterly return: Form 141, Schedule C, is used as a challan-cum-statement and is generally due within 30 days after the end of the month in which tax is deducted.

What counts as commission or brokerage?

The provision covers income by way of commission or brokerage paid to a resident, excluding the insurance commission separately listed at Serial No. 1(i). In practice, the substance of the arrangement matters. A payment described as an incentive, agency fee, referral fee or service charge may still need classification based on the contract, the work performed and the relationship between the parties.

Do not classify every payment connected with a sale as commission. A discount, rebate, principal-to-principal purchase price, salary, or payment for professional or technical services may fall under a different rule. Keep the agreement, invoice, calculation of the payment and a short note explaining the classification.

Insurance commission has its own entry. It includes remuneration or reward, by commission or otherwise, for soliciting or procuring insurance business, including continuation, renewal or revival of policies. The payer is “any person,” the threshold is ₹20,000, and the rate is “rates in force.” Do not apply the ordinary 2% rate under Serial No. 1(ii) to insurance commission without checking the applicable rate and payee details.

When must the payer deduct tax?

For section 393(1) payments, deduction is generally required at the earlier of:

• crediting the amount to the payee’s account; or
• paying it in cash, by cheque or draft, or by any other mode.

Therefore, an amount credited to a commission payable or suspense account may trigger TDS even if cash is paid later. An advance commission payment can also trigger deduction. Reconcile the accounts payable ledger and actual disbursements through the tax year so a threshold crossed partway through the year is not overlooked.

Where the first credit or payment event occurs on or before 31 March 2026, the 1961 Act rules apply. Where it occurs on or after 1 April 2026, use the corresponding provisions of the 2025 Act. A contract spanning the transition date should be reviewed payment by payment.

Practical examples

Company pays a resident broker in instalments

A company pays ₹15,000 in August and ₹8,000 in December to the same resident broker for the tax year. The aggregate is ₹23,000, above the ₹20,000 threshold. The company should generally deduct at 2% on the covered amount when the threshold is crossed, considering the applicable credit/payment dates.

Individual payer whose business receipts were below the specified-person test

An individual running a business whose preceding tax year turnover did not cross the specified-person test pays a resident agent covered commission. If the individual is not required to deduct under another listed entry, and the aggregate covered payments under Table Serial No. 6(ii) exceed ₹50 lakh in Tax Year 2026-27, the 2% withholding rule may apply. The individual should use the applicable Form 141 route rather than assume the ordinary quarterly Form 140 process applies.

Insurance commission

An insurer or another payer credits a resident insurance agent with commission for procuring policies. This falls under the separate insurance entry, not the ordinary commission/brokerage entry. Check the rates in force and annual ₹20,000 threshold before deduction.

Deposit, statement and payee records

For regular deductors reporting resident, non-salary TDS, the Income Tax Department uses quarterly Form 140. The standard filing dates are:

TDS deducted by regular deductors is generally deposited by the 7th of the following month. A separate deadline generally applies to non-government deductors for tax deducted in March (30 April); government deductors and certain special cases follow different deposit procedures. Confirm the applicable Rule 218 timeline and challan process for the payer’s category.

Before filing, reconcile the payee’s PAN, resident status, gross commission, date of credit/payment, rate, tax deducted, challan and return totals. Share the appropriate TDS certificate and correct any statement error promptly so the payee can match the credit in tax records. For general filing steps, see TaxClear’s TDS return filing guide.

A resident payee should report commission income in the correct income head in their income tax return and claim eligible TDS credit based on their tax records. Commission income may be business income or may fall under another head depending on the facts; the payer’s TDS classification does not by itself decide the recipient’s final tax treatment. An insurance agent may also need to select the correct ITR form based on other income and eligibility; see TaxClear’s ITR guide for insurance agents.

Exceptions and checks before withholding

• Non-resident payee: Do not use the resident rate table automatically. Review the separate non-resident provision, chargeability, applicable rate and treaty documents where relevant.
• Missing PAN: Higher-rate provisions may apply when the payee does not furnish a valid PAN. Check the applicable section 397 rule before payment.
• Lower or nil deduction: A valid certificate or declaration may affect the amount to be withheld. Verify its validity, scope and conditions before relying on it.
• Personal-purpose payments: Section 393 contains a personal-purpose exclusion for certain payments by an individual or HUF under specified table entries. Confirm that the particular entry and facts fall within the exclusion; do not assume it applies to a business payment.
• Threshold history: Track aggregate payments in the tax year and correct any missed deduction or reporting promptly.

Keep a commission TDS schedule with the payee name and PAN, residency status, payment type, agreement, credit/payment dates, annual aggregate, applicable table entry, rate, deduction, deposit date, challan reference and Form 140 or Form 141 acknowledgement. This makes quarterly filing and year-end reconciliation easier. The separate Section 393 contractor-payment guide explains the related contract-work rules; commission payments should still be assessed under their own applicable table entry.

Common mistakes to avoid

• Continuing to quote section 194H for an event occurring on or after 1 April 2026.
• Applying the ₹20,000 threshold to a payer that should instead assess the separate ₹50 lakh route, or vice versa.
• Assuming each invoice gets a separate ₹20,000 exemption instead of tracking the annual aggregate.
• Deducting only on the amount above the threshold after it is crossed.
• Using the 2% ordinary commission rate for insurance commission without checking its distinct “rates in force” rule.
• Waiting until cash payment even though the amount was credited earlier.
• Using Form 140 when the payer must use the Form 141 challan-cum-statement route, or filing Form 141 for ordinary specified-person commission payments.
• Treating a non-resident payee like a resident.

Frequently asked questions

What is the TDS rate on commission or brokerage in Tax Year 2026-27?

For a specified person paying a resident commission or brokerage other than insurance commission, the general rate under section 393(1), Table Serial No. 1(ii), is 2% once the aggregate exceeds ₹20,000 in the tax year.

Is TDS deducted only on the amount above ₹20,000?

No. When the applicable annual threshold is crossed, TDS generally applies to the entire amount covered by the provision, not only the excess.

Does the ₹20,000 threshold apply to insurance commission?

Insurance commission has a separate entry at Serial No. 1(i). It has a ₹20,000 threshold, but the rate is “rates in force,” not the ordinary 2% commission rate.

When does an individual or HUF use the ₹50 lakh threshold?

The ₹50 lakh threshold is for certain individual or HUF payers under Table Serial No. 6(ii), where they are not required to deduct under the specified alternative entries. It is not a general threshold for all commission payers.

Which form should be used?

Regular specified-person deductors generally report resident non-salary TDS in quarterly Form 140. A qualifying individual or HUF payer using the separate ₹50 lakh route generally reports through Form 141, Schedule C. Confirm the applicable entry and current portal instructions.