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Commission TDS under payment code 1007 (formerly Section 194H) is a high-volume low-value transaction stream — many small commission payments to many agents — with a 5% rate and a low ₹15,000 aggregate threshold per deductee. The combination of high volume and a low threshold means the threshold rollover is the most error-prone aspect; ERPs that miss the rollover under-deduct on entire cohorts of agents.
Reconciliation joins the commission-payable ledger (agent commission accruals and payouts) with the TDS challan register and Form 168 lines on a composite key of deductor TAN, payment code 1007, quarter, and deductee PAN. The matching engine tracks year-to-date commission per agent against the ₹15,000 threshold, validates the 5% rate at invoice level, and flags any commission payout that crossed the threshold mid-quarter without retrospective deduction on the breaching payment.
Agent master annotated with PAN and year-to-date commission counter that resets on April 1 each FY. Reconciliation ruleset configured with payment code 1007 mapped to legacy 194H for cross-era matching, 5% rate validation, and an explicit boundary check against code 1010 (e-commerce participant) and code 1003 (professional fees) for service-based agents.
Form 168 commission lines fully matched to the commission-payable ledger, threshold rollover dates documented per agent, rate variances flagged at invoice level, and a clean audit pack showing every commission payment with the agent's running year-to-date balance and the deduction trigger date.
Quick reference: Payment Code 1007 at a glance
| Attribute | Value |
|---|---|
| Payment code | 1007 |
| Parent section | 393 |
| Sub-clause | 393(1)(f) |
| Legacy section | 194H |
| Rate | 5% on gross commission or brokerage |
| Threshold | ₹15,000 aggregate per deductee per FY |
| Applicability | Resident commission agents, brokers, sales agents (excludes insurance commission) |
| Effective from | April 1, 2026 |
| Form 168 description | Commission and brokerage |
| Challan | ITNS 281, payment code field = 1007 |
What payment code 1007 covers
Payment code 1007 under Section 393(1)(f) captures commission or brokerage paid to resident agents and brokers across most industries. The list is wide: distribution channel commission paid by manufacturers to distributors, sales agent commission paid by FMCG companies to field agents, sub-broker brokerage paid by stock-broking firms to sub-brokers, real estate broker commission, advertising agency commissions on media spend, and travel agent commissions on bookings.
The 1961 Act’s Section 194H definition of “commission or brokerage” — any payment received or receivable, directly or indirectly, by a person acting on behalf of another for services rendered or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article, or thing, not being securities — carries over to Section 393(1)(f). The exclusion for insurance commission (governed by a separate code in the 1004–1006 range) and for brokerage on stock exchange transactions persists.
A worked example for FY 2026-27: A consumer-electronics distributor pays its regional sales agent ₹85,000 in commission across April–June 2026 (commission on units sold). The first month’s commission of ₹22,000 breaches the ₹15,000 aggregate threshold at the very first payment. TDS at 5% (₹1,100) is deducted on the first payment, and 5% applies on every subsequent commission payout for the rest of FY 2026-27. All challans carry payment code 1007 under Section 393.
Rate, threshold, and applicability rules
The 5% rate applies on gross commission — pre any chargeback adjustment for returned goods, cancelled bookings, or refunded transactions. If a sales agent earns ₹50,000 commission in May and then has ₹10,000 clawed back in June for product returns, the May TDS was on ₹50,000 (₹2,500 deducted); the June clawback adjusts the net commission paid but does not retrospectively reduce the May TDS. The agent claims the full ₹2,500 in Form 168 and reflects the ₹10,000 reversal in their own books separately.
The ₹15,000 aggregate threshold is per deductee, per financial year. Reset on April 1. An agent earning ₹14,000 in March 2026 (no TDS, below 194H threshold under the legacy regime) and ₹14,000 in April 2026 (no TDS — the FY 2026-27 counter is at ₹14,000, below the ₹15,000 threshold) is correct because the threshold resets cross-FY.
No-PAN agents trigger 20% deduction, a punitive rate that often pushes agents to furnish PAN before the second commission payout.
What payment code 1007 replaced (1961 Act → 2025 Act)
Section 194H under the 1961 Act has been the home of commission TDS since 1992. Successive amendments tuned the rate (10% → 5% in 2016, brief reduction during COVID, restored to 5%) and the threshold (₹5,000 in 2007, ₹15,000 from 2016). The 2025 Act absorbs 194H into Section 393(1)(f) without further substantive change.
Cross-era reconciliation: a commission payment to a distributor settled on March 30, 2026 falls under Section 194H — challan and Q4 FY 2025-26 return carry the legacy reference. The same distributor’s April commission payout, processed April 8, 2026, falls under code 1007 — challan keys off 1007 and the Q1 FY 2026-27 return references the new code. Vendor statements straddling FY-end will mix legacy 194H and code 1007 lines; the Section 393 TDS reconciliation framework covers the dual-mode matching needed during this transition.
Form 168 reconciliation for payment code 1007
Form 168 surfaces commission TDS lines filtered by payment code 1007. For an active sales agent with monthly commission, expect 12 lines per FY at 5% each. Reconciliation against the commission-payable ledger joins on deductor TAN plus deductee PAN plus quarter.
Pitfalls when joining Form 168 code 1007 lines to your commission ledger:
- Threshold trigger month off-by-one: the deductor triggered deduction at ₹16,000 (just over ₹15,000) but the agent’s records show ₹14,500 at that point — usually a per-invoice rounding difference.
- Commission vs e-commerce participant payout overlap: if you run a marketplace and pay sellers a commission that is structured as a participant payout net of seller fees, the TDS sits under code 1010 (e-commerce participant, 1%), not code 1007.
- Service agent vs professional confusion: a marketing agency on retainer with deliverable scope is professional fees (code 1003, 10%); the same agency on a pure commission-of-sales basis is commission (code 1007, 5%).
Common reconciliation issues for payment code 1007
The recurring operational patterns:
- Threshold rollover failure. Many small commission payouts roll up across months; an ERP that does not track running YTD per agent will miss the threshold trigger and under-deduct.
- Net-of-claw-back confusion. TDS is on gross; claw-back adjustments do not retrospectively reduce TDS.
- Insurance commission misclassification. Insurance commission goes under a separate code (1004 range); confused agents sometimes flow under 1007.
- Real-estate vs property TDS confusion. Real-estate broker commission is 1007 (5%); the buyer-deducted TDS on a property purchase above ₹50 lakh sits under a different code entirely (1006 range under Section 393).
For more on commission and brokerage reconciliation patterns, see our TDS reconciliation software and reconciliation software India overviews.
For the full set of codes across Sections 392 / 393 / 394 / 413, see the TDS payment codes 1001–1092 master reference. Authoritative text is on the Income Tax India e-filing portal, where the Income Tax Act 2025 enrolled text and CBDT notifications on payment code 1007 are published.
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