Income Tax for Commission Agents India 2026 — TDS, Section 44AD, GST, ITR Filing

Commission agents earn income by facilitating transactions between buyers and sellers. Whether you are a commodity broker, sales agent, or distribution agent, your commission income has specific tax and GST implications. Here is the complete guide for FY 2025-26.

How Commission Income Is Taxed

Commission income is taxed as "Profits and Gains from Business or Profession" — not as salary. This means:

• You can deduct legitimate business expenses
• You may be eligible for presumptive taxation under Section 44AD
• You must file ITR-3 or ITR-4

TDS on Commission — Section 194H

When a company or individual pays commission to an agent, they must deduct TDS under Section 194H:

Note: The TDS rate was reduced from 5% to 2% in Budget 2025 (effective October 1, 2024). The threshold was increased from ₹15,000 to ₹20,000.

Section 194H does NOT apply to:

• Insurance commission (covered by Section 194D)
• Commission paid to non-residents (covered by Section 195)

If PAN not submitted: TDS at 20%.

The TDS appears in Form 26AS. Claim it as credit when filing your ITR.

Section 44AD — Presumptive Taxation for Commission Agents

Commission agents can use Section 44AD (presumptive taxation for businesses):

• Declare 6% of gross commission as taxable income (digital receipts)
• Declare 8% of gross commission as taxable income (cash receipts)
• No books of accounts required
• File ITR-4

Turnover limits for FY 2025-26:

• Up to ₹3 crore (if 95% receipts are digital/banking)
• Up to ₹2 crore (if cash receipts exceed 5%)

Example:

• Annual commission: ₹50L (all digital)
• Taxable income under 44AD: 6% × ₹50L = ₹3L
• Tax (new regime): Nil (below ₹4L basic exemption)

Note: Commission agents are specifically excluded from Section 44ADA (which is for professionals). They must use Section 44AD.

Deductible Expenses (Regular Taxation)

If maintaining regular books and filing ITR-3:

GST for Commission Agents

Commission agents providing services to businesses must charge 18% GST on their commission:

• Registration threshold: ₹20L annual commission
• GST rate: 18% on commission income
• ITC: Available on business expenses

Example:

• Commission earned: ₹5,00,000
• GST at 18%: ₹90,000
• Total invoice: ₹5,90,000

Types of Commission Agents and Tax Treatment

Which ITR Form for Commission Agents?

Advance Tax for Commission Agents

If total tax liability exceeds ₹10,000, pay advance tax in four instalments. Commission income can be irregular — estimate based on year-to-date receipts.

Common Mistakes Commission Agents Make

1. Filing ITR-1 — Commission income requires ITR-3 or ITR-4
2. Not claiming TDS credit — Check Form 26AS for all TDS deducted
3. Not registering for GST — Once commission exceeds ₹20L, GST registration is mandatory
4. Not charging GST on commission — Failure to charge GST results in penalties
5. Using Section 44ADA instead of 44AD — Commission agents are not professionals; they use 44AD

Frequently Asked Questions

Is commission received from a foreign company taxable in India?

Yes. Commission earned for services rendered in India is taxable in India, regardless of whether the payer is a foreign company. If the services are rendered outside India, the income may not be taxable in India (depends on residential status).

Can a commission agent claim vehicle depreciation?

Yes, if maintaining regular books (not using 44AD). Depreciation on a vehicle used for client visits is deductible at 15% per year.

What if the principal does not deduct TDS on commission?

You are still liable to pay tax on the commission income. Report it in your ITR and pay self-assessment tax if required. The principal may face penalties for non-deduction.

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Commission agent needing help with ITR filing, TDS reconciliation, or GST registration? I handle ITR-4 under Section 44AD for commission agents. WhatsApp for a quote.