Section 194D

Section 194D — the law in short

What the courts have decided on section 194D, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — s.194H: two per cent on commission or brokerage paid to a resident since 1 October 2024, on a threshold that became twenty thousand rupees on 1 April 2025 CBDT Circulars & InstructionsCuts both ways
  I pay my selling agents a percentage on every order they bring in, and I give my distributors a discount off the list price. Do I deduct under section 194H, at what rate, and from what figure does the obligation start?
  Section 194H makes a payer who is not an individual or a Hindu undivided family deduct tax on any income by way of commission or brokerage paid to a resident, at two per cent. It was five per cent until 30 September 2024 and was substituted by Act No. 15 of 2024 with effect from 1 October 2024, so anything still applying five per cent to a later payment is applying a superseded rate. The threshold is an annual aggregate, not a monthly one: no deduction is required where the amount, or the aggregate of the amounts, credited or paid or likely to be credited or paid to that payee during the financial year does not exceed twenty thousand rupees, a figure substituted for fifteen thousand rupees by Act No. 7 of 2025 with effect from 1 April 2025 — and it stayed an annual aggregate on the very date section 194-I's rent threshold became a monthly one, so a payer who runs both rent and commission now applies two different kinds of test. Insurance commission is expressly outside the section and belongs to section 194D, and services rendered that are "professional services" are excluded from the definition and belong to section 194J; the section is also not divided into sub-sections, being printed as one unnumbered operative paragraph, three provisos and an Explanation in four clauses. All of this is the Income-tax Act, 1961, which the CBDT's transition FAQ says stands repealed on 1 April 2026. For a credit or payment on or after that date the corresponding provision is serial number 1(ii) of the Table to section 393(1) of the Income-tax Act, 2025, at the same two per cent and the same twenty thousand rupees.
• Statutory position — s.194-IB and s.194M: the once-a-year deduction on rent, the cap that operates only under s.206AA, the gateway that keeps most individuals out of s.194M, and why neither needs a TAN CBDT Circulars & InstructionsCuts both ways
  I am an individual paying Rs 70,000 a month rent, and separately I have paid an interior contractor Rs 62 lakh for my own house. When exactly do I deduct, how much, and do I need a TAN?
  Under section 194-IB you deduct once, not monthly: the tax is deducted at the time of credit of rent for the last month of the previous year, or the last month of the tenancy if you vacate during the year, or at the time of payment of that rent, whichever is earlier, and the rate is two per cent of the income by way of rent, substituted for five per cent with effect from 1 October 2024. Under section 194M you deduct two per cent, again substituted for five per cent from the same date, but only if you are not a person required to deduct under section 194C, 194H or 194J, and only if the sum or aggregate of sums credited or paid to that resident during the financial year exceeds fifty lakh rupees. Neither section requires a TAN: section 194-IB(3) and section 194M(2) each disapply section 203A.
• Statutory position — s.194DA: payment under a life insurance policy, and the date the base changed from the gross sum to the income component CBDT Circulars & InstructionsCuts both ways
  My insurer deducted tax on the whole maturity amount, not on the gain. Was that right, and from what date is s.194DA computed on the income component only?
  The base changed on 1 SEPTEMBER 2019. Until then s.194DA required deduction on the sum paid — two per cent of the sum from 1 October 2014, then one per cent of the sum from 1 June 2016 — with nothing in the text confining it to the gain. From 1 September 2019 the words 'five per cent on the amount of income comprised therein' were substituted for 'one per cent' by Act No. 23 of 2019, and the base has been the income component ever since; the rate then came down from five per cent to two per cent by Act No. 15 of 2024 with effect from 1 October 2024, so the section now requires two per cent on the amount of income comprised in the payment.
• Statutory position — s.197: the Assessing Officer may certify a lower rate, or nil, for a listed section, but only on the payee's application and only for a period of the previous year — the 1961 Act position, for deductions up to 31 March 2026 CBDT Circulars & InstructionsCuts both ways
  My money is stuck. Every invoice I raise has tax deducted at the full rate, my actual tax for the year is far less than the deductions, and I only get it back a year later when the refund comes. Somebody told me to apply for a lower-deduction certificate under section 197. What does section 197 actually say — which payments does it cover, what does the Assessing Officer have to be satisfied about, what form do I file, and can the certificate be backdated to cover the deductions already made?
  Section 197(1) lets the payee apply to the Assessing Officer for a certificate that the payer may deduct at a lower rate, or not at all. It is not open-ended: it works only for the sections named in it, and the Assessing Officer must be satisfied that “the total income of the recipient justifies” the lower rate. The list is sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195 — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 and 194Q by Act No. 15 of 2024 with effect from 1 October 2024. Section 197(2) then binds the payer: once a certificate is given, he deducts at the certified rate, or nothing, until the Assessing Officer cancels it. Section 197(2A) is the rule-making power, and the rules made under it are rule 28 (application in Form No. 13, filed electronically), rule 28AA (how the rate is worked out and how long the certificate lasts) and rule 28AB (a no-deduction certificate for trusts and other section 139(4C) filers). Nothing in the section or the rules confers a power to backdate a certificate, and in substance it operates forward: rule 28AA(4) sends it to the named deductor, who cannot un-deduct months already past. From 1 April 2026 this machinery is gone — the Income-tax Act, 1961 was repealed by section 536 of the Income-tax Act, 2025 and the successor is section 395 of the 2025 Act, applied for in Form No. 128 under rule 213 of the Income-tax Rules, 2026, and from the same date section 395(6) lets that application go to a prescribed income-tax authority instead of the Assessing Officer.
• Statutory position — s.194D: insurance commission, the threshold, and why the section states no rate CBDT Circulars & InstructionsCuts both ways
  The insurer deducted tax on my agency commission even though it was under twenty thousand rupees for the year. What is the s.194D threshold, and which year does my case fall in?
  Section 194D obliges any person paying a resident income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business — including business relating to the continuance, renewal or revival of policies of insurance — to deduct at the rates in force, at credit or payment, whichever is earlier. The second proviso stops deduction where the amount of such income, or the aggregate of the amounts credited or paid or LIKELY to be credited or paid during the financial year to the payee, does not exceed twenty thousand rupees as the section now stands; the editions as amended up to 2020 and up to 2023 print fifteen thousand rupees, and those as amended up to 2012 and up to 2014 print twenty thousand rupees, substituted for five thousand by the Finance Act, 2010 with effect from 1 July 2010.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.