When is tax deducted on commission or brokerage?
Tax is deducted on commission or brokerage under section 194H when the amount paid or credited to a resident in the financial year crosses the threshold. The rate is 2 percent from 1 October 2024. The threshold is ₹20,000 from 1 April 2025. In the year 2024-25 the threshold was ₹15,000.
No. From 1 October 2024 the rate under section 194H is 2 percent. The 5 percent rate applied before that date.
When does the deduction start?
The deduction is at the earlier of credit and payment. Commission below the year’s threshold is not deducted. The payee can be an individual. The section does not switch off because the payee is an individual. It switches off when the payer is an individual or a Hindu undivided family whose accounts were not liable to audit under section 44AB in the preceding year.
What is the rate?
| Period | Rate | Threshold in the year |
|---|---|---|
| 1 April 2024 to 30 September 2024 | 5 percent | ₹15,000 |
| 1 October 2024 to 31 March 2025 | 2 percent | ₹15,000 |
| From 1 April 2025 | 2 percent | ₹20,000 |
If the payee does not furnish a PAN, the deduction is at the higher of this rate and 20 percent. The rates of that year, for the other common sections, are on the 2024-25 chart. The credit appears in Form 26AS.
Who does not deduct?
Insurance commission is section 194D. A professional or technical fee is section 194J. A purchase of goods is section 194Q. Those are not deducted again under section 194H. The deductor deposits the tax and issues Form 16A. A default draws interest under the Act. This page does not set a monthly interest figure.
Frequently asked questions
Four questions cover the old rate, a payment to an individual, insurance commission, and a missing PAN.
Is the rate still 5 percent?
No. From 1 October 2024 the rate under section 194H is 2 percent. The 5 percent rate applied before that date.
Is commission paid to an individual outside the section?
No. The section applies to commission paid to a resident, including an individual. The person who need not deduct is an individual or a Hindu undivided family that was not liable to tax audit in the preceding year.
Is insurance commission under 194H?
No. Insurance commission is section 194D. Professional fees are section 194J.
What if the payee has no PAN?
The deduction is at the higher of the section rate and 20 percent. Furnishing the PAN keeps the section rate.
Sources
Commission and brokerage are section 194H of the Income-tax Act, 1961. The rate changed on 1 October 2024. The threshold changed on 1 April 2025.