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Who is this guide for? If you are a real estate agent, property broker, property dealer, or real estate consultant earning commission or brokerage from property transactions in India, this guide covers your income tax obligations for AY 2026-27 (FY 2025-26): how your commission income is taxed, why presumptive taxation does not apply to you, which ITR form to file, TDS on your earnings, GST obligations, RERA compliance, and deductible business expenses.
Real estate agents and brokers in India earn commission-based income from facilitating property sales, purchases, and rentals. The standard brokerage rate is 1% to 2% of the property value from each party, with rates varying by city and property type.
Despite being a common profession, real estate brokerage has a unique tax position: it is one of the businesses explicitly excluded from the Section 44AD presumptive taxation scheme. This means brokers cannot declare a flat percentage of turnover as profit. They must maintain proper books of accounts and file ITR-3, not ITR-4.
This guide covers every tax obligation a real estate broker faces, from commission income classification to GST, TDS, and RERA.
How Real Estate Brokers Earn Income
Real estate agents earn through commission or brokerage, typically structured as a percentage of the property transaction value.
Tax Rate Chart
Typical Brokerage Rates by Property Type
Commission charged to each party (buyer and seller separately)
Residential Flat (Metro)
Mumbai, Delhi-NCR, Bangalore, Chennai
Residential Flat (Tier 2/3)
Smaller cities with lower property values
Commercial Property
Office, retail, warehouse
Plot / Land
Higher due to title verification and boundary work
Rental (Residential)
Standard across most cities
Rental (Commercial)
Varies by lease tenure
Source: Industry standard; rates vary by city, deal size, and negotiation
A broker handling 10 residential flat sales averaging Rs 80 lakh each, at 1% commission from each party, earns Rs 16 lakh annually. This entire amount is business income subject to income tax.
Income Classification: Business Income
Commission or brokerage earned by a real estate agent is classified as Profits and Gains of Business or Profession under the Income Tax Act. It is not salary, not income from other sources, and not capital gains.
If brokerage is a one-time or casual receipt, it may be reported as income from other sources. But if you earn commission regularly, year after year, the income falls squarely under business head and must be reported in ITR-3.
Key implications of business income classification:
- You can deduct all legitimate business expenses from gross commission
- You must maintain books of accounts under Section 44AA
- You may need a tax audit if turnover exceeds the threshold
- You must pay advance tax if total tax liability exceeds Rs 10,000
Why Section 44AD Does Not Apply to Real Estate Brokers
This is the single most important tax rule real estate brokers need to know.
Section 44AD allows small businesses to declare 6% (digital) or 8% (cash) of turnover as deemed profit, skip detailed bookkeeping, and file ITR-4. However, Section 44AD(6) explicitly excludes:
- Persons carrying on agency business
- Persons earning income in the nature of commission or brokerage
Real estate brokers fall under both exclusions. You cannot use Section 44AD regardless of your turnover.
Section 44ADA for professionals also does not apply because real estate brokerage is not a specified profession (legal, medical, engineering, accountancy, technical consultancy, interior decoration, or any other notified profession).
What this means in practice:
- You must maintain complete books of accounts
- You must report actual income and actual expenses
- You must file ITR-3, not ITR-4
- Filing ITR-4 with commission income is incorrect and may trigger a defective return notice
ITR Form Selection
Tax Rate Chart
ITR Form for Real Estate Brokers
Correct form based on business structure
Individual / HUF Broker
Business income from commission/brokerage
Partnership Firm
Firm-level return; partners file ITR-3 for their share
Company (Pvt Ltd)
If brokerage business is incorporated
Broker with Only Salary + Brokerage
Cannot use ITR-1 once business income exists
Source: Income Tax Department; ITR form applicability rules AY 2026-27
Within ITR-3, report your commission income under Schedule BP (Business and Profession). Use the correct business code for real estate activities on the ITR form.
Business Expenses You Can Deduct
Since you must report actual income and expenses (no presumptive scheme), maximizing legitimate deductions is critical for reducing tax liability.
Tax Rate Chart
Deductible Business Expenses for Real Estate Brokers
Common expenses that reduce taxable commission income
Office Rent
Rent for office/shop used for brokerage business
Staff Salaries
Salaries to assistants, back-office, field staff
Advertising & Marketing
Property listing portals, newspaper ads, online ads, hoardings
Site Visit Travel
Fuel, vehicle maintenance, cab fares for property visits
Mobile & Internet
If used for both personal and business, deduct business share only
RERA Registration Fee
Initial registration and 5-year renewal fees
Professional Indemnity Insurance
Insurance premium for brokerage liability
Portal Subscriptions
99acres, MagicBricks, Housing.com, NoBroker subscriptions
Client Entertainment
Reasonable business entertainment; keep receipts
Depreciation
Office furniture (10%), computers (40%), vehicles (15%/30%)
Source: Income Tax Act; Section 30-43 business deductions
Vehicle expenses: If you use a vehicle for site visits, you can claim fuel, maintenance, and depreciation. If the vehicle is used for both personal and business purposes, claim only the business-use portion and maintain a log.
Home office: If you run the brokerage from home, you can claim a proportionate share of rent, electricity, and internet as business expenses based on the area used for business.
Books of Accounts: Section 44AA
Since Section 44AD does not apply to commission/brokerage businesses, maintaining proper books of accounts is mandatory under Section 44AA (Section 62 under ITA 2025).
Books you must maintain:
- Cash book recording all cash receipts and payments
- Journal for non-cash transactions
- Ledger for all accounts
- Bank statements for all business bank accounts
- Commission receipts/invoices for every transaction
- Expense bills and vouchers for all deductions claimed
Books must be retained for 6 years from the end of the relevant assessment year.
Penalty for non-maintenance: Rs 25,000 under Section 271A. This penalty applies if you were required to maintain books and failed to do so without reasonable cause.
Practically, use accounting software (Tally, Zoho Books, or similar) to maintain digital records. Digital records are accepted as valid compliance.
Tax Audit: Section 44AB
Tax audit under Section 44AB (Section 63 under ITA 2025) becomes mandatory for real estate brokers based on total commission turnover:
Tax Rate Chart
Tax Audit Threshold for Commission/Brokerage Business
When Form 3CB/3CD audit is mandatory
Turnover up to Rs 1 Crore
If cash transactions exceed 5% of total
Turnover Rs 1 Cr to Rs 10 Cr
If cash receipts or payments exceed 5% of total
Turnover above Rs 10 Crore
Mandatory regardless of cash percentage
Turnover Rs 1 Cr to Rs 10 Cr (digital)
If cash receipts AND payments are within 5% of total
Source: Section 44AB(a); Finance Act 2023 amendments
Turnover for audit threshold: For a commission agent, turnover means total commission or brokerage received during the year, not the property transaction values you facilitated.
Audit deadline: The tax audit report must be filed by October 31, 2026 for AY 2026-27. If audit is required, the ITR filing deadline also extends to October 31.
Audit forms: Individual brokers use Form 3CB (audit report) and Form 3CD (statement of particulars).
TDS on Your Commission: Section 194H
When a builder, developer, property owner, or any other payer pays you commission or brokerage, they must deduct TDS under Section 194H (Section 393(1) under ITA 2025).
Tax Rate Chart
TDS on Real Estate Brokerage Under Section 194H / 393(1)
Rates and thresholds for FY 2025-26 and FY 2026-27
TDS Rate (with PAN)
Reduced from 5% effective October 2024
TDS Rate (without PAN)
Section 206AA penalty rate
Threshold
No TDS if aggregate commission below Rs 20,000 in the FY
Deductor
Builder, developer, or property owner paying commission
Source: Section 194H / 393(1); Finance Act 2024 amendments
Who deducts: The person paying you the commission deducts TDS, not you. If an individual or HUF (not subject to audit) pays you brokerage, TDS under Section 194H does not apply to them. Instead, Section 194M applies if the aggregate payment exceeds Rs 50 lakh.
Claiming TDS credit: The TDS deducted from your commission appears in your Form 26AS and AIS. Reconcile before filing so all TDS credits are captured. If TDS is deducted but not showing, follow up with the deductor to file their TDS return.
TDS You May Encounter: Section 194IA
As a real estate broker, you do not deduct TDS under Section 194IA (that is the buyer's obligation when purchasing property above Rs 50 lakh). However, you should understand this provision because clients frequently ask about it.
Section 194IA requires the property buyer to deduct 1% TDS on the sale consideration (or stamp duty value, whichever is higher) when purchasing immovable property worth Rs 50 lakh or more. The buyer deposits this using Form 26QB.
This TDS is on the property seller, not on your commission. Your commission attracts separate TDS under Section 194H.
GST on Real Estate Brokerage
Real estate brokerage services attract GST at 18% (9% CGST + 9% SGST, or 18% IGST for interstate services).
SAC codes applicable:
- 997221 - Property management services on fee or commission basis
- 997222 - Building sales on fee or commission basis
- 997223 - Land sales on fee or commission basis
For detailed GST compliance on commission and agency services, see the GST on commission agents guide.
GST Registration Threshold
GST registration is mandatory once your annual brokerage income crosses:
- Rs 20 lakh for most states
- Rs 10 lakh for special category states (Northeastern states, Himachal Pradesh, Uttarakhand, Jammu & Kashmir)
GST on Invoicing
Once registered, you charge 18% GST on every commission invoice. The taxable value is your commission amount, not the property transaction value.
Example: You earn Rs 1 lakh commission on a property sale. Your invoice:
- Commission: Rs 1,00,000
- CGST 9%: Rs 9,000
- SGST 9%: Rs 9,000
- Total invoice: Rs 1,18,000
Input Tax Credit (ITC)
You can claim ITC on GST paid for business expenses directly linked to brokerage services: office rent, advertising, software subscriptions, accounting services, and communication expenses. Maintain valid tax invoices for all GST-paid business expenses.
RERA Registration
Under Section 9 of the Real Estate (Regulation and Development) Act, 2016, every real estate agent facilitating the sale or purchase of a plot, apartment, or building in a RERA-registered project must register with the state RERA authority.
Tax Rate Chart
RERA Agent Registration: Key Facts
Mandatory compliance for property brokers
Registration Fee (Individual)
Varies by state; some states charge more
Validity
Renewal application 60 days before expiry
Penalty (Unregistered)
Extendable up to 5% of property cost
Continued Default
For continued non-compliance with RERA orders
Source: RERA Act, 2016; Section 9 and Section 59
RERA registration fees are a deductible business expense for income tax purposes. Keep the registration certificate and renewal receipts as documentation.
Advance Tax Obligations
Since real estate brokers do not have TDS deducted on all their income (individual buyers and some property owners may not deduct TDS), you must pay advance tax if your total tax liability for the year exceeds Rs 10,000.
Advance tax is paid in four quarterly installments:
Tax Rate Chart
Advance Tax Installment Schedule
Due dates and cumulative percentage of estimated tax
June 15
First installment
September 15
Cumulative (pay 30% more)
December 15
Cumulative (pay 30% more)
March 15
Cumulative (pay 25% more)
Source: Section 211; Income Tax Act
Late payment interest: If you miss or underpay advance tax, interest is charged under Section 234B (1% per month on shortfall) and Section 234C (1% per month on installment shortfall).
Practical tip: Real estate commissions are irregular, as deals close unpredictably. Estimate conservatively based on the previous year's income and adjust in later installments as actual income becomes clearer.
Old Regime vs New Regime for Real Estate Brokers
Real estate brokers should carefully evaluate both tax regimes because the old regime allows Chapter VI-A deductions (80C, 80D, home loan interest) that can significantly reduce tax, while the new regime offers lower slab rates.
When old regime may be better:
- You have a home loan with interest under Section 24(b)
- You invest in PPF, ELSS, LIC, NPS (Section 80C, 80CCD)
- You have health insurance premiums (Section 80D)
- Your total deductions and exemptions exceed approximately Rs 3.75 lakh
When new regime may be better:
- Your deductions are minimal
- You prefer the simplicity of lower slab rates without tracking exemptions
- Your taxable income after business expenses is in the Rs 7-15 lakh range where new regime rates are favorable
Use the old vs new regime comparison guide with your actual numbers to determine which saves more tax.
Common Mistakes Real Estate Brokers Make
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Filing ITR-4 with commission income. Section 44AD does not apply to commission or brokerage businesses. Filing ITR-4 triggers a defective return notice. Always file ITR-3.
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Not maintaining books of accounts. Without Section 44AD, books are mandatory. Failure attracts Rs 25,000 penalty under Section 271A.
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Ignoring advance tax. Commission income without full TDS coverage creates advance tax liability. Missing deadlines means paying 1% per month interest.
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Not registering for GST after crossing Rs 20 lakh. Once your annual brokerage crosses the threshold, GST registration and 18% charging is mandatory. Late registration attracts penalties.
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Operating without RERA registration. Facilitating property transactions in RERA-registered projects without agent registration attracts Rs 10,000 per day penalty.
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Not reconciling TDS in Form 26AS. Builders and developers deduct 2% TDS on your commission. If they file their TDS return late or with errors, your TDS credit is lost. Check AIS and Form 26AS before filing.
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Mixing personal and business expenses. Claiming personal mobile bills, personal vehicle use, or family trips as business expenses invites scrutiny. Maintain clear separation and document the business purpose of every expense.
Income Tax Act 2025: Section Mapping
From Tax Year 2026-27 (returns filed in 2027), the new Income Tax Act 2025 section numbers apply. For the current AY 2026-27 (FY 2025-26), old section numbers are still used on ITR forms.
Tax Rate Chart
ITA 2025 Section Mapping for Real Estate Brokers
Old (1961) to New (2025) section numbers
Books of Accounts: 44AA
Same requirements, new number
Tax Audit: 44AB
Same thresholds, new number
Presumptive (Business): 44AD
Still excludes commission/brokerage
TDS on Commission: 194H
2% rate unchanged
TDS on Property: 194IA
1% rate unchanged
Source: Income Tax Act, 2025; effective April 1, 2026
For the complete mapping of all relevant sections, see the ITA 2025 section mapping guide.
Filing Checklist for Real Estate Brokers
Use this checklist before filing your ITR for AY 2026-27:
- Compile all commission receipts and invoices for the year
- Total your gross commission income from all sources
- Gather all business expense bills and vouchers
- Reconcile TDS credits in Form 26AS / AIS with actual TDS deducted
- Calculate net business income (gross commission minus deductible expenses)
- Check if tax audit is required (turnover above Rs 1 crore / Rs 10 crore)
- If audit required, get Form 3CB/3CD prepared by a CA before October 31
- Calculate advance tax paid vs actual liability; compute interest if any under Section 234B/234C
- Compare old vs new regime tax liability
- File ITR-3 on the income tax e-Filing portal
- Deadline: August 31, 2026 (no audit) or October 31, 2026 (audit required)
- Verify RERA registration is current (valid for 5 years)
- Confirm GST returns (GSTR-1 and GSTR-3B) are filed if registered
For filing deadlines across all taxpayer categories, see the ITR filing deadline guide.
