TDS on Commission 2026-27: Why ₹15,000 Threshold Cuts Your Payout

If you earn commission — as an insurance agent, a mutual fund distributor, a real estate broker, a travel agent, or a part-time affiliate marketer — you have probably noticed something uncomfortable on your payout statement: a chunk goes missing before it ever reaches your bank account. That missing chunk is TDS under Section 194H, and from FY 2026-27 the rules that decide when it kicks in have tightened in a way that will hit thousands of small earners who were previously untouched.

Here is the number that surprised most of my clients this year: the annual threshold below which no TDS is deducted on commission and brokerage was raised to ₹20,000 in Budget 2024 (effective April 1, 2025) — but a lot of people are still working with the old ₹15,000 figure, and many payer companies quietly reset their systems to the lower slab or misapply it per transaction. The confusion around the "₹15,000 vs ₹20,000" threshold is real, and it is eating into payouts. If you don't understand exactly how the threshold works, you can lose liquidity for months waiting for a refund.

In this article I'll break down TDS on commission 2026-27 in plain language: the exact threshold, the rate, a step-by-step calculation with real ₹ figures, how to claim it back if your income is below the taxable limit, and the common mistakes that cost agents money every quarter.

Key Takeaways

• Section 194H TDS applies to commission and brokerage — not salary, not professional fees (that's 194J).
• The current TDS rate is 2% (reduced from 5% w.e.f. 1 October 2024), deducted when annual commission from a payer crosses the threshold.
• The no-TDS threshold is ₹20,000 per financial year per payer — but many still operate on the old ₹15,000 figure, so verify what your company applies.
• No PAN = TDS at a flat 20%. Always give your PAN to the payer.
• If your total income is below the taxable limit, the TDS deducted is fully refundable — but only if you file an ITR.
• Track every deduction in your Form 26AS and AIS to make sure the payer actually deposited your TDS.

What is Section 194H and who does it affect?

Section 194H of the Income Tax Act requires any person (company, firm, or individual/HUF above the tax-audit turnover limit) paying commission or brokerage to deduct tax at source before paying you. The idea is simple: the government collects a slice of your income upfront rather than waiting for you to declare it.

"Commission or brokerage" under 194H covers payments received directly or indirectly for services rendered (other than professional services) in the course of buying or selling goods, or in relation to any transaction relating to an asset, valuable article, or thing. In practice, this catches a very wide net:

• LIC and general insurance agents earning policy commission
• Mutual fund distributors and ARN holders
• Real estate brokers and property agents
• Travel agents earning commission from airlines/hotels
• Freelancers and affiliate marketers earning referral or sales commission
• Stockists and distributors earning trade discounts treated as commission

Who does NOT get 194H TDS? Salaried employees (that's Section 192), and professionals like doctors, lawyers, CAs, and consultants whose fees fall under Section 194J. If you're confused about which section applies to your income, the distinction matters — the rate and threshold are different.

What is the TDS on commission 2026-27 threshold and rate?

Here's where the confusion lives, so let's be precise.

Before 1 April 2025, Section 194H had a threshold of ₹15,000 per financial year, and TDS was deducted at 5%. Budget 2024 made two changes that carry into FY 2026-27:

1. The TDS rate was cut from 5% to 2%, effective 1 October 2024.
2. The threshold was raised from ₹15,000 to ₹20,000 per financial year, effective 1 April 2025.

So for FY 2026-27, the correct position is: no TDS if your total commission from a single payer is ₹20,000 or less in the year; 2% TDS on the full amount once it crosses ₹20,000.

Why do people still say ₹15,000? Two reasons. First, older articles and payer systems haven't been updated. Second — and this is the important bit — the threshold is per payer, per financial year, not across all your income combined. If you earn commission from three different companies, each applies its own ₹20,000 threshold. That's how a person earning ₹50,000 total commission can sometimes escape TDS entirely, while another earning ₹25,000 from one company gets deducted.

Important: the threshold is cumulative for the year, not per transaction

A common error by both payers and agents: treating the threshold per payment. If you receive ₹8,000 in June, ₹9,000 in September, and ₹6,000 in December from the same company, that's ₹23,000 — you've crossed ₹20,000, and TDS applies on the whole amount from the point it crosses. The payer should catch up and deduct on the full ₹23,000, not just the last instalment.

How is TDS on commission calculated? A worked example

Let's take a concrete case. Meet Priya, a mutual fund distributor in Pune. In FY 2026-27 she earns commission from three different AMCs (asset management companies):

• AMC A: ₹48,000 for the year
• AMC B: ₹18,500 for the year
• AMC C: ₹31,000 for the year

She has submitted her PAN to all three. Let's calculate her TDS payer by payer.

AMC A — ₹48,000: Above ₹20,000, so TDS applies on the full amount.
TDS = 2% × ₹48,000 = ₹960

AMC B — ₹18,500: Below the ₹20,000 threshold, so no TDS. Even though her total income across all AMCs is far above ₹20,000, each payer checks only its own payout. TDS = ₹0.

AMC C — ₹31,000: Above ₹20,000.
TDS = 2% × ₹31,000 = ₹620

Total TDS deducted for the year = ₹960 + ₹0 + ₹620 = ₹1,580.

Her gross commission was ₹97,500. She receives ₹95,920 in hand across the year, and ₹1,580 sits with the government against her PAN. When she files her return, this ₹1,580 gets adjusted against her final tax liability — and if her total income falls below the taxable limit, she gets it all back as a refund.

What happens if Priya forgot to give her PAN?

This is where it hurts. Under Section 206AA, if you don't furnish PAN, TDS is deducted at the higher of 20% or the applicable rate. So for AMC A's ₹48,000, instead of ₹960 she'd lose ₹9,600. That's a ₹8,640 difference on one payer alone — locked up until she files a return and claims a refund. Always share your PAN.

Common mistake: Many part-time agents assume that because TDS was deducted, they don't need to file a return. Wrong. TDS is an advance collection, not your final tax. If you don't file an ITR, the money simply stays with the government. Filing is the only way to reconcile and claim a refund.

Old threshold vs new threshold: how much does the change cost you?

The rate cut from 5% to 2% actually helps your cash flow — less is deducted upfront. But the interplay of rate and threshold across different commission levels is worth seeing side by side. Here's a comparison of what gets deducted under the old regime (5%, ₹15,000 threshold) versus the current FY 2026-27 regime (2%, ₹20,000 threshold), assuming PAN is provided.

Annual commission (single payer)	Old TDS (5%, ₹15k threshold)	FY 2026-27 TDS (2%, ₹20k threshold)	Extra cash in your hand now
₹18,000	₹900	₹0 (below threshold)	₹900
₹25,000	₹1,250	₹500	₹750
₹50,000	₹2,500	₹1,000	₹1,500
₹1,00,000	₹5,000	₹2,000	₹3,000
₹3,00,000	₹15,000	₹6,000	₹9,000

The takeaway: the FY 2026-27 rules are genuinely more agent-friendly in terms of cash flow. A distributor earning ₹3 lakh in commission keeps ₹9,000 more through the year than under the old rules. That's money you can redeploy — say into a monthly SIP or an RD — instead of parking it interest-free with the tax department until refund season.

Step-by-step: how to reconcile and reclaim your commission TDS

Deduction is only half the story. Here's the exact process to make sure you're not overpaying and that you get every rupee back that you're owed.

1. Collect your commission statements. Ask each payer for a year-end statement showing gross commission and TDS deducted. Insurance companies and AMCs usually provide this by May–June.
2. Download Form 26AS. Log in to the income tax e-filing portal, go to e-File → Income Tax Returns → View Form 26AS. This shows every rupee of TDS deposited against your PAN. Match it line-by-line with your statements.
3. Cross-check with AIS. The Annual Information Statement (AIS) captures commission income even more comprehensively. If a payer deducted TDS but it doesn't appear in 26AS, they may not have deposited it — chase them, because you can't claim credit for TDS that isn't reflected.
4. Estimate your total taxable income. Add all commission, plus any other income (salary, interest, capital gains). Run it through our Income Tax Calculator under both regimes to see which is cheaper.
5. File your ITR. Commission income is usually reported under "Income from Business or Profession" (or "Income from Other Sources" for occasional referral commission). Claim the full TDS as a credit.
6. Claim your refund. If TDS exceeds your final liability, the excess is refunded — typically within a few weeks of e-verification, directly to your pre-validated bank account.

Pro tip: use Form 15G to stop unnecessary deduction

This is one most agents miss. If your total estimated income for the year is below the basic exemption limit, you can submit Form 15G (or Form 15H if you're a senior citizen) to the payer. This is a self-declaration that your income is non-taxable, and it instructs the payer not to deduct TDS in the first place. That means no waiting months for a refund — the money stays in your pocket from day one. Submit it at the start of the financial year, and renew it each year.

How commission income is taxed once it reaches you

TDS is not your final tax — it's a prepayment. Your commission income is added to your total income and taxed at your slab rate. Here's how the two regimes stack up for a full-time agent for FY 2026-27, assuming commission is their main income and they take standard deductions where available.

Total annual income	Tax (New Regime, approx.)	Tax (Old Regime, approx. with deductions)	Better choice (typical)
₹6,00,000	₹0 (rebate u/s 87A)	₹0–₹10,000 depending on deductions	New Regime
₹9,00,000	₹40,000	₹30,000–₹50,000	Depends on 80C/80D use
₹15,00,000	₹1,40,000	₹1,50,000–₹1,90,000	New Regime for most

Figures are illustrative and rounded; your actual liability depends on exact deductions, cess, and any business expense claims. Always run your own numbers.

One big advantage for commission earners: if you report income under the business head, you can deduct genuine business expenses — phone bills, travel, office rent, marketing, a share of internet costs. This reduces your taxable income legitimately. If your commission turnover is modest, you may also opt for presumptive taxation under Section 44ADA/44AD in eligible cases — worth discussing with a tax professional.

If you also claim rent as a business expense or receive HRA from other salaried income, read our guide on HRA exemption calculation and pair it with the HRA Exemption Calculator. And if health insurance is part of your planning, the Section 80D deduction guide shows how to claim up to ₹1 lakh.

What else is changing in FY 2026-27 that affects agents?

The 194H changes don't exist in isolation. Several other tweaks are landing around the same period that commission earners should watch:

• Simplified TDS declarations. The move toward a single, consolidated declaration form is meant to reduce paperwork — see our explainer on the Form 12BB vs Form 121 single TDS declaration.
• Broader personal tax changes. Several slab and rule adjustments take effect from April 2026 — we've summarised the ones that matter in 7 income tax changes from April 1, 2026.
• GST on commission. Don't forget that if your annual commission turnover crosses ₹20 lakh (₹10 lakh in special-category states), you likely need GST registration — commission is a taxable service. Use the GST Calculator to work out what to charge and collect.
• NRI earners. If you're a non-resident earning commission or holding Indian assets, the TDS and capital gains rules differ — see NRI capital gains tax 2026.

Putting your refund to work

Here's a mindset shift I push with every agent I advise: don't treat your TDS refund as a windfall. It was always your money. But once it lands, use it deliberately.

Say Priya from our example gets a ₹1,580 refund. On its own that's trivial. But if she instead adjusts her Form 15G / advance tax planning so that ₹1,580 (plus the cash-flow saved from the lower 2% rate) goes into a monthly SIP, the compounding matters. Even ₹2,000/month at 12% CAGR over 15 years grows to roughly ₹10 lakh — plug your own figures into our SIP Calculator or model a one-time refund in the Lumpsum Calculator. For safer parking, compare returns with the FD Calculator or the tax-free PPF Calculator.

You'll find every tool mentioned here — and dozens more — on our free calculators page. If you're unsure which applies to your situation, reach out or read more about how AlarmDaddy works.

Frequently asked questions

What is the TDS rate on commission for FY 2026-27?

The TDS rate under Section 194H is 2% (reduced from 5% with effect from 1 October 2024). It applies once your total commission from a single payer exceeds ₹20,000 in the financial year. If you don't provide your PAN, the rate jumps to 20%.

Is the commission TDS threshold ₹15,000 or ₹20,000?

For FY 2026-27 it is ₹20,000 per payer per financial year. The old ₹15,000 threshold was raised to ₹20,000 effective 1 April 2025. Some payer systems and older guides still reference ₹15,000, so confirm with your company.

Can I avoid TDS on my commission income?

Yes, legitimately. If your total annual income is below the basic exemption limit, submit Form 15G (or 15H for senior citizens) to the payer at the start of the year so no TDS is deducted. Otherwise, TDS will be deducted and you can claim it back by filing your ITR.

Do I have to file an ITR if TDS was deducted on my commission?

You should. TDS is only an advance collection, not your final tax. Filing an ITR is the only way to reconcile the amount deducted, claim any refund due, and stay compliant — especially if the TDS deducted exceeds your actual liability.

Is commission income taxed under salary or business income?

Commission earned by an agent or distributor is generally treated as income from business or profession, which lets you deduct legitimate business expenses. Occasional referral commission may be reported under income from other sources. It is never treated as salary under Section 192.

What if my payer deducted TDS but it doesn't show in Form 26AS?

You can only claim TDS credit that actually appears in Form 26AS or your AIS. If a deduction is missing, the payer likely hasn't deposited it or filed their TDS return correctly. Contact them immediately with your commission statement and ask them to rectify their filing.

Does GST apply to my commission on top of TDS?

They are separate. TDS is income-tax collected on your earnings; GST is a service tax you charge your client. If your commission turnover crosses ₹20 lakh (₹10 lakh in special-category states), you generally need GST registration and must charge GST on your commission invoices.

The bottom line

Understanding TDS on commission 2026-27 comes down to three numbers: the ₹20,000 per-payer threshold, the 2% rate, and the 20% penalty rate for missing PAN. Get those right, submit Form 15G if your income is below the taxable limit, reconcile your Form 26AS every quarter, and file your ITR to claim back what's yours. The recent rate cut means more of your commission stays with you through the year — so plan for it rather than treating the refund as a surprise.

Run your own numbers with our Income Tax Calculator and Salary In-Hand Calculator, and if commission is your primary income, sit down once a year with these figures before the March 31 deadline. A few minutes of reconciliation can save you thousands in locked-up cash and missed refunds.

Image credit: Scrabble Series Income Tax — ccPixs.com, via flickr (BY 2.0), sourced from Openverse.