TDS on Doctor Referral Commission in India: Section 194H Explained (2026)

What Section 194H covers

Section 194H of the Income-tax Act deals with tax deducted at source on commission or brokerage. In plain terms, when one party pays another for services rendered in the course of buying, selling, or arranging business (rather than paying a salary or a straightforward purchase price), that payment can qualify as commission for the purposes of this section, and TDS applies before the payer hands over the money.

The provision does not care what you call the payment in your own records. What matters is the substance of the arrangement: is one party being compensated for facilitating, procuring or servicing business on behalf of the other? If so, it is worth checking whether 194H applies, regardless of whether your internal paperwork labels it "commission," "referral fee," "service charge" or something else entirely.

Does it apply to lab referral or commission payments?

For a diagnostic lab, this question comes up most often around three kinds of payments: fees paid to an outside laboratory for tests outsourced to them, payments to a collection centre for samples they bring in, and fees paid to a consultant pathologist for reporting work. Where these are genuine commercial arrangements for services rendered, they commonly fall within the scope of Section 194H, and TDS obligations follow.

A separate matter entirely (and not a tax question) is whether a payment to a referring doctor for sending patients is a legitimate business payment in the first place. Indian medical ethics regulations restrict a registered practitioner from receiving a commission for referrals. Whether a specific arrangement is permissible is a legal and ethical question, separate from whether TDS applies once a payment is made. Get that question reviewed by a professional before you rely on either answer.

Who deducts, and when

The obligation to deduct TDS under Section 194H sits with the payer: your lab, not the doctor, centre or consultant receiving the money. The deduction is generally required at whichever happens first: the time the amount is credited to the payee's account in your books, or the time it is actually paid, whichever is earlier. In practice, for a lab running a periodic settlement, that usually means the deduction is worked out at the point you finalise and run the payout, before the money leaves your account.

Once deducted, the tax has to be deposited with the government within the prescribed timeline, reported in the quarterly TDS return, and a certificate issued to the payee so they can claim credit for it against their own tax liability. Missing any one of these four steps is a compliance gap on the payer's side, not the payee's.

The rate and threshold: treat as "prevailing," not fixed

A rate of 10% is commonly cited for Section 194H, and the Act also sets a minimum threshold: a total amount paid to a single payee in a financial year, below which no deduction is required at all. We are deliberately not stating a specific rupee figure for that threshold here, because both the rate and the threshold are set by the Income-tax Act and revised through Finance Acts, and a number that is accurate today can be out of date by the next assessment year. Before you deduct (or decide a payment falls below the threshold and skip deduction), confirm the prevailing rate and threshold with your accountant.

The four steps: deduct, deposit, file, certify

Deduct: work out the TDS on the gross commission at the point of credit or payment, whichever is earlier, and hold back that amount from what you pay the referrer.
Deposit: pay the deducted amount to the government within the prescribed timeline.
File: report the deduction in your quarterly TDS return (commonly Form 26Q for payments to residents other than salary).
Certify: issue the payee a TDS certificate so they can claim the credit when they file their own return.

Every one of these steps is your accountant's job to execute correctly and on time. Your job as the lab is to hand them clean, complete numbers, which is exactly where most of the friction in this process actually lives.

Records to keep per payee

Whatever your process, keep three figures on record for every payout to every payee, every period: the gross commission earned, the TDS deducted from it, and the net amount actually paid. Multiply that across a dozen referrers, outside labs and collection centres settled every month, and it is easy to see why so many labs lose track: a figure typed into a spreadsheet once, at month-end, under time pressure, is exactly where errors creep in and where a later audit becomes painful.

You can get a feel for what gross-versus-TDS-versus-net looks like on your own numbers using our free referral commission calculator, which includes a 194H TDS toggle so you can see an estimated net figure alongside the gross commission.

Common mistakes labs make

A few patterns show up repeatedly when referral payouts are handled by hand:

Deducting on the wrong base. TDS is worked out on the gross commission, not on some rounded or estimated figure typed in after the fact.
Paying net without a documented gross. If the gross figure and the TDS deducted from it are not recorded per payee, there is nothing for your accountant to reconcile at filing time.
Forgetting cancellations and refunds. A commission tied to a bill that was later cancelled or refunded should not have been paid (or deducted from) in the first place, and manual spreadsheets rarely catch this.
Treating the threshold as a one-time check. The threshold applies to the aggregate paid to a payee across the financial year, not to each individual payment in isolation.
Assuming HealthFlow, or any software, files the return for you. Software can compute and hold the numbers cleanly; the deposit, the quarterly filing and the certificate are still your accountant's responsibility.

How an exportable per-payee statement makes this easy for your CA

This is where HealthFlow's Pay-Run helps without overstepping into being your tax filer. You set a commission rule per test (flat or percentage, per payee) and the commission is computed automatically as each test is billed. At period-end, a single Pay-Run settles every referring doctor, consultant, collection centre and outside lab together. Each payee gets a WhatsApp payslip, you get a printable statement per payee, and the whole run exports to Excel showing gross, TDS and net per payee: the exact three numbers your accountant needs, already tied back to the bills they came from. Your owner dashboard also shows net revenue after commissions, live.

To be precise about what this is and is not: HealthFlow does not deduct-and-file on your behalf, and it does not generate a TDS certificate or Form 16A. Those remain filings your accountant prepares and submits. What it removes is the manual reconstruction: instead of retyping figures from a register into a return, your accountant works from one clean export. Doctor-referral payouts and white-label branding are part of a higher plan.

See exactly how HealthFlow's Pay-Run tracks gross, TDS and net per payee →

For the wider picture (how payouts are calculated, reconciled against bills, and the legal considerations around who can legitimately be paid), see the full doctor referral payouts guide.

Not tax advice. This page is general information about how Section 194H commonly applies to commission and referral-type payments in India. Rates, thresholds and filing requirements are set by the Income-tax Act and revised over time. Your lab's specific facts (who you pay, what for, and how much) determine your actual obligations. Confirm your position with a qualified accountant or CA before you deduct, deposit or file.

Frequently asked questions

Does Section 194H apply to referral commission paid by a diagnostic lab?

Generally yes. Section 194H of the Income-tax Act covers commission or brokerage payments, and a fee a lab pays to a referrer for bringing in business (where that arrangement is a legitimate commercial one, such as payments to a collection centre, an outside lab, or a consultant for services rendered) commonly falls within it. The lab making the payment (the payer) is the one responsible for deducting tax at source, not the person receiving the payment. This is general information, not tax advice; confirm how your specific arrangements are classified with your accountant or CA.

What rate and threshold apply under Section 194H?

A rate of 10% is commonly cited for Section 194H, and there is a minimum aggregate payment threshold in a financial year below which TDS is not required. Both the rate and the threshold are set by the Income-tax Act and Finance Acts and can change, so we deliberately do not state a specific current figure here. Confirm the prevailing rate and threshold with your accountant before you deduct or skip a deduction.

Does HealthFlow file TDS or issue TDS certificates for lab payouts?

No. HealthFlow does not file TDS returns and does not generate TDS certificates or Form 16A. Those are filings and documents your accountant prepares and files with the tax department. What HealthFlow produces is an exportable per-payee statement showing gross commission, TDS deducted and net amount paid for every settlement, which is exactly the working your accountant needs to reconcile and file correctly.

TDS on doctor referral commission in India: Section 194H, explained