TDS for travel agents: 194H, 194C and the 2026 rules

Every commission that lands in your account has already had tax taken out of it, whether you noticed or not. Every payment your agency makes to a cab vendor, a small hotel, or a sub-agent might need tax taken out of it too, and most agents never set that up. The result: TDS on travel agent commission that nobody reconciles at tax time, and TDS you should be deducting on outgoing payments that nobody deducts at all.

This guide sorts out which section covers what you receive, which covers what you pay, what happens if a vendor hasn't given you a PAN, and why the section number everyone quotes is about to change.

TDS on your commission: Section 194H, at 2%

When an airline, hotel, or DMC pays you commission or brokerage, they're required to deduct TDS before the money reaches you, under Section 194H of the Income Tax Act. The rate is 2%, cut down from 5% effective 1 October 2024, and it remains 2% as of July 2026 (ClearTax). The deduction only kicks in once a single payer's commission to you crosses ₹20,000 in the financial year; below that, nothing is withheld.

Situation	Section	Rate (as of July 2026)	Threshold
Commission you earn from an airline/hotel/DMC	194H	2%	₹20,000 per FY, per payer
Commission you pay a sub-agent	194H	2%	₹20,000 per FY, per payee
No PAN furnished by the recipient	194H	20%	Same threshold applies first

Example: An airline pays you ₹18,000 in commission across the year. It's under ₹20,000, so nothing is deducted; you get the full ₹18,000. The same airline pays you ₹45,000 instead. It deducts 2%, which is ₹900, and you receive ₹44,100. That ₹900 isn't lost. It's tax you've already paid and should be claiming back (more on that below).

If you're still sorting out your agency's tax registrations from scratch, this sits alongside your GST setup, not instead of it. Both apply once your turnover and payment volumes hit their respective thresholds, and it's worth walking through the GST registration rules for a new travel agency at the same time you're setting up TDS tracking, so your accounts don't end up half-configured.

194C or 194H for a travel agent? The cab-and-hotel confusion

This is the question that keeps CAclubindia threads alive every filing season, and the honest answer is: it depends on what the payment is for, not who receives it. 194H covers commission and brokerage, a percentage cut for arranging or referring business. 194C covers payments for carrying out contracted work, which is why straight cab fares and some vendor invoices get filed differently from commission payouts.

The same cab operator can sit under either section depending on the deal. A flat fare you pay for point-to-point transport looks like a contracted service. A cut you pay that same operator for referring you a corporate group looks like commission. 194C carries its own rates and thresholds, and they don't move on the same schedule as 194H's did in October 2024, so don't assume the numbers are identical. Confirm current 194C figures with your CA before you configure any vendor payment as a deduction, rather than guessing from a forum thread.

Careful: Don't default to 194H just because the payment touches "travel." A hotel invoice for a room block is usually a straight purchase, not commission, and may not attract TDS at all unless it's structured as a rebate or brokerage arrangement. Get your CA to classify each recurring vendor relationship once, in writing, so your bookkeeping doesn't shift with whoever's filing that quarter.

Without PAN, the rate jumps to 20%

If a commission recipient hasn't furnished their PAN, the payer must deduct TDS at 20% instead of 2%, once the same ₹20,000 threshold is crossed (ClearTax). That's true whether you're the one deducting on a sub-agent's commission, or an airline is deducting on yours.

For an agency running on commission margins, that gap is the difference between losing 2% and losing a fifth of the payment. Get a valid PAN on file with every airline, hotel, and DMC you deal with, and check it's recorded correctly on their system, not just handed over once and forgotten. The same discipline applies in reverse: before you pay a sub-agent or referral partner their first commission cheque, collect their PAN and keep a copy with the payment record.

Claiming your TDS back against what you owe

TDS deducted from your commission isn't a fee you've paid to the airline or hotel. It's tax you've already paid to the government on their behalf, and it should reduce what you owe when you file your return. The payer is required to issue you a TDS certificate (Form 16A) for each quarter they've deducted, and that amount should also show up against your PAN in your Form 26AS and AIS.

Before you file, reconcile the commission you actually received against what each payer reports as deducted. Mismatches happen more often than agents expect: a DMC deducts on the gross commission but pays you net of a separate adjustment, or a smaller vendor deducts correctly but files late, so the credit doesn't show up in your 26AS for that quarter. Chase it before filing, not after; correcting a mismatched TDS credit after your return is filed takes far longer than catching it before. If you're also untangling which ITR form and presumptive-tax rules apply to your agency's income, the 44AD trap for travel agents is worth reading alongside this.

What you must deduct when you're the one paying

The same 194H rule runs in both directions. If your agency pays a sub-agent, a freelance destination expert, or anyone else a commission or referral fee, and that payment to a single recipient crosses ₹20,000 in the financial year, you're the deductor. You withhold 2% (or 20% if they haven't given you a PAN), deposit it with the government by the due date, and issue them a TDS certificate so they can claim it back on their own return, exactly as you would from an airline.

This is the step most small agencies skip entirely. It's easy to notice TDS being deducted from money coming in and never notice that you're supposed to be deducting it on money going out. If your agency runs sub-agent networks or pays referral commissions regularly, set up the deduction and deposit as a monthly routine tied to your payment run, not an annual scramble at return-filing time. Since commission rates vary a lot by route and season, it's worth cross-checking what you're actually paying out against the current commission rates card for the trade so the TDS math sits on top of numbers you trust.

The 2026 renumbering: why older TDS articles are already stale

The Income Tax Act 2025 replaces large parts of the 1961 Act, effective 1 April 2026, and that includes renumbering the sections practitioners have quoted for decades. Commentary tracking the transition points to Section 393(1) as the provision replacing Section 194H, carrying forward the same 2% rate and ₹20,000 threshold, though the exact section mapping should be treated as provisional until the CBDT publishes its own notification confirming it (Terra Insight).

Practically, this means the substance doesn't change on 1 April 2026, only the label. The 2%, the ₹20,000 threshold, and the 20% penalty for no PAN are what actually matter for your books; the section number is what your CA's software will need updated. But it also means a lot of existing TDS explainers online are quoting a section number that stops applying after that date, so don't trust an article's authority just because it cites "194H" confidently. Confirm against your CA's current reference before you rely on any specific section number for FY 2026-27 filings.

Common questions

What is the TDS rate on travel agent commission in FY 2026-27?

2% (still commonly cited as Section 194H, though this may be renumbered to Section 393(1) from 1 April 2026 pending CBDT confirmation), unchanged from the rate effective 1 October 2024. It applies once a single payer's commission to you crosses ₹20,000 in the financial year; below that threshold, nothing is deducted at all.

194C or 194H for a travel agent?

194H covers commission and brokerage, the percentage cut you earn or pay for arranging or referring business. 194C covers payments for contracted work, which is why straight cab fares and some vendor invoices get filed differently. The dividing line is what the payment is for, not who receives it, so the same vendor can sit under either section depending on the deal.

Is there TDS on payment to a travel agent for hotel booking?

Only if what's being paid counts as commission or brokerage rather than a flat service fee. If a corporate client pays you a cut for arranging hotel rooms and structures it as commission, 194H at 2% likely applies once it crosses ₹20,000 in the FY. If it's structured as a flat contracted fee instead, some accountants file it under 194C at different rates, so agree the structure and section with the client's accounts team in writing before the first invoice.

What happens if a travel agent doesn't have a PAN?

TDS climbs to 20% instead of 2%, once the same ₹20,000 threshold is crossed. For an agency living on commission, that's the difference between losing 2% and losing a fifth of the payment, so get a PAN on file with every airline, hotel, and DMC, and confirm it's recorded correctly.

The short version

• TDS on your commission is 2% under Section 194H (as of July 2026), cut from 5% since 1 October 2024, and only applies once a single payer's commission to you crosses ₹20,000 in the FY.
• Without a PAN on file, that rate jumps to 20%. Get your PAN registered with every airline, hotel, and DMC you work with.
• 194C and 194H aren't interchangeable: commission and brokerage sit under 194H, contracted work (like a straight cab fare) often sits under 194C at different rates. Get your CA to classify each recurring vendor relationship once, in writing.
• If you pay sub-agents or referral partners commission above ₹20,000 a year, you're the deductor, not just the deductee. Withhold, deposit, and issue them a TDS certificate.
• Reconcile every TDS certificate you receive against your Form 26AS/AIS before filing. That deducted amount is tax already paid, and it should reduce what you owe.
• The Income Tax Act 2025 renumbers Section 194H (reportedly to Section 393(1)) effective 1 April 2026, with the same rate and threshold expected to carry over; confirm the final mapping with your CA once notified.
• Rules and rates change; treat every figure here as "confirm with your CA" before you file.