Is my commission from an Indian company taxable in India?

It depends on where you earned it. Commission for services rendered or used in India, or where you have a business connection here, is taxable. Commission for services performed entirely outside India is generally not taxable in India.

I sourced export orders abroad for an Indian company. Is that taxed?

Generally not. Commission for services performed entirely outside India by a non-resident, like sourcing export orders abroad, is generally not taxable in India, because there is no business connection here. The Supreme Court confirmed this in the Toshoku case.

Should the Indian payer deduct TDS?

Only if the commission is chargeable to tax in India. The resident commission section does not apply to you; the payer deducts under Section 195, and only on a sum chargeable here, so a genuinely offshore commission should carry no TDS.

Didn't the tax office remove the exemption?

It withdrew the old circulars that gave automatic comfort in 2009, but that did not make the income taxable. It is now decided case by case on the source facts, so the position needs to be established on your specific facts rather than assumed.

Special Income

Commission or brokerage from an Indian company as an NRI

Whether it is taxable in India turns on where you rendered the services, not just who paid you.

You earn commission or brokerage from an Indian company, a referral fee, an agency commission, a payment for finding them business, and you are unsure whether India taxes it, and whether the payer should deduct tax. The answer is not automatic just because an Indian company paid you: it depends on where you actually did the work that earned the commission. Commission for services done entirely abroad can be outside Indian tax altogether, while commission for work connected to India is taxable. Here is the test that decides it, and the TDS position.

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Last reviewed: 26 July 20266 min readReviewed by Preetesh Maloo, CA

The short answer

Commission or brokerage you earn is taxable in India where the services that earned it were rendered or used in India, or you have a business connection here. But commission for services performed entirely outside India by a non-resident, such as sourcing export orders abroad for an Indian exporter, is generally not taxable in India, because there is no business connection and the income is not deemed to arise here. The withholding follows: the resident commission section does not apply to you, and an Indian payer deducts under Section 195 only if the commission is actually chargeable to tax in India, so a genuinely offshore commission should carry no TDS. Since the older comfort circulars were withdrawn, this is now decided case by case on the facts.

References on this page

Commission is taxable in India where the services were rendered or used in India, or there is a business connection (Section 9)
Commission for services performed entirely outside India by a non-resident is generally not taxable in India (CIT v Toshoku)
The resident commission section (194H) does not apply; an Indian payer deducts under Section 195 only if the commission is chargeable in India
Since the older comfort circulars were withdrawn in 2009, it is decided case by case on the source facts

The source test decides it

The key question is not who paid you, but where you earned it. Under Section 9, commission or brokerage is Indian-source, and taxable here, where the services that gave rise to it were rendered or utilised in India, or where you have a business connection in India. So a commission for work you did in India, or for arranging something used in India, is taxable here.

But the flip side is well established. Where a non-resident earns commission for services performed entirely outside India, the classic case being an agent abroad who sources export orders for an Indian exporter, that commission is generally not taxable in India, because there is no business connection in India and the income is not deemed to arise here. The Supreme Court confirmed this long ago in the Toshoku case, and it still holds. So a genuinely offshore commission can fall wholly outside Indian tax.

The withholding, and why it is now case by case

The tax deducted at source follows the same logic. The resident commission section that deducts on brokerage does not apply to a non-resident. An Indian payer's obligation is under Section 195, and the Supreme Court has confirmed that Section 195 requires deduction only on a sum that is chargeable to tax in India. So if the commission is for services done entirely abroad and is not chargeable here, the payer should not withhold at all, and can seek the department's confirmation of that.

There is one point of history to know. The tax office used to have circulars that plainly said no tax need be deducted on such export commission, but those were withdrawn in 2009. The withdrawal did not make the income taxable; it simply removed the automatic comfort, so now it is decided case by case on the source facts rather than by a blanket rule. That means the position needs to be established on your specific facts, that the services were genuinely rendered abroad with no business connection here, rather than assumed. A practising CA establishes the source position, handles the Section 195 question so a genuinely offshore commission is not needlessly withheld, and documents it against the withdrawal of the old circulars.

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What's involved

What the CA actually does

1
We apply the source test
We establish whether your commission is for services rendered or used in India, and so taxable here, or entirely offshore and outside Indian tax.
2
We handle the TDS
We make sure an Indian payer withholds under Section 195 only where the commission is chargeable here, and seek a nil-deduction where it is not.
3
We document the position
We document that the services were genuinely rendered abroad with no business connection here, since the old comfort circulars were withdrawn.
4
We reclaim over-deduction
Where a payer withheld on an offshore commission that was not chargeable, we reclaim it on your return.

What to have ready

Documents you'll typically need

The commission arrangement and what it was for
Where you performed the services
The TDS deducted, if any
Your PAN, TRC and residency details

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next — how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 31 countries.

Frequently asked questions

Common questions

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Earning commission from an Indian company abroad?

Tell us what the commission is for and where you did the work. A practising CA will fix the tax and TDS on a free call, no obligation.

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