India’s upcoming Income Tax Act, 2025, streamlines the withholding tax framework on commission payments from April 2026, introducing new thresholds and simplifications aimed at modernising the country’s tax compliance landscape.
India’s new Income Tax Act, 2025, which takes effect from April 1, 2026, narrows and simplifies the tax deducted at source rules on commission payments. According to CAclubindia, the new framework brings the main commission provisions under Section 393(1) and applies a 2% rate when total commission to one payee rises above ₹20,000 in a financial year.
The change is part of a broader rewrite of withholding tax rules under Section 393, which multiple tax guides say was designed to replace a more fragmented system in the 1961 law. TDSman says commission and brokerage now sit under Section 393(1) Table Sl. No. 1(ii), while insurance commission has been shifted to Section 393(1) Table Sl. No. 1(i), showing that the government has recast several common payment types into a single structure.
Under the new rules, corporate and other non-individual payers must deduct tax once the annual commission threshold is crossed. For individuals and Hindu undivided families, CAclubindia says the duty to deduct under the commission provisions applies only if the prior year’s business turnover exceeded ₹1 crore or professional receipts exceeded ₹50 lakh; otherwise, separate provisions for higher-value payments may apply. India Briefing and AUBSP both describe Section 393 as the new umbrella provision for a range of TDS categories, including commission, interest, rent and contractor payments.
The article also sets out practical points that will matter to businesses and agents. TDS is triggered when the payment is credited or actually paid, whichever happens first, including transfers to a suspense account. GST is excluded if it is shown separately on the invoice, and CAclubindia says the tax is then calculated only on the base commission amount. The publication also notes that trade discounts are not commission, while brokerage paid in relation to real estate, sales or facilitated transactions generally falls within the withholding net.
There are also specific carve-outs. CAclubindia says underwriting commission on public issues, loan processing fees charged directly by banks, insurance commission, lottery-related commission and professional fees governed elsewhere are outside this particular provision. It adds that the nil or lower deduction route remains available where a valid certificate or eligible declaration is in place. Deposits for most deductions are due by the 7th of the following month, with March deductions payable by April 30, while quarterly Form 26Q deadlines remain unchanged.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
