Looking for expert help with GST and income tax for loan DSAs and recovery agents India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- An individual loan DSA billing a bank or NBFC charges no GST. The lender pays it under reverse charge (Notification 13/2017-Central Tax (Rate), S. No. 11).
- Recovery agents working for banks, financial institutions or NBFCs are also under reverse charge (S. No. 8), whether they're individuals or companies.
- If all your income is reverse charge commission, you don't need GST registration (Notification 5/2017-Central Tax). One stream of forward charge income changes that.
- Banks deduct 2% TDS on commission above Rs 20,000 a year (Section 194H for FY 2025-26; Section 393(1) Table Sl. No. 1(ii) of the 2025 Act from 1 April 2026).
- Commission earners can't use Section 44AD. Keep books and file ITR-3 on actual profit.
Do loan DSAs have to pay GST on commission? Not if you work as an individual. Services by an individual Direct Selling Agent to a bank or NBFC are under reverse charge, so the lender pays GST and your invoice carries none (Notification 13/2017-Central Tax (Rate), S. No. 11). A DSA company, firm or LLP charges GST itself under forward charge. Recovery agents of banks and NBFCs are under reverse charge in every case.
If you source home loans, personal loans or credit cards for a bank, collect overdue EMIs for an NBFC, or run a banking kiosk as a business correspondent agent, your income is commission. Most commission earners assume they must register for GST the day they cross Rs 20 lakh and that 44AD will keep their income tax simple. For individual DSAs, the first is often wrong and the second always is. This guide covers the GST rules in force today and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the matching sections of the Income-tax Act 2025 that apply from 1 April 2026.
Who pays GST on DSA, recovery and BC commission?
It depends on two things: who you are, and who pays you. Notification 13/2017-Central Tax (Rate) lists the services where the recipient pays GST under Section 9(3) of the CGST Act. Four of its entries cover lending and banking agents, and one entry in the exemption notification covers rural banking.
Comparison
GST on Banking and Lending Agent Income
| Your service | Who you bill | Who pays GST | Source |
|---|---|---|---|
| Loan or card sourcing as an individual DSA | Banking company or NBFC | The bank or NBFC, under reverse charge | Notif 13/2017-CT(R), S. No. 11 |
| Loan or card sourcing by a DSA company, firm or LLP | Banking company or NBFC | You, under forward charge | S. No. 11 excludes body corporates, partnerships and LLPs |
| Recovery or collection of dues (any form of business) | Banking company, financial institution or NBFC | The bank, FI or NBFC, under reverse charge | Notif 13/2017-CT(R), S. No. 8 |
| Business facilitator services | Banking company | The bank, under reverse charge | Notif 13/2017-CT(R), S. No. 12 |
| Agent of a business correspondent (CSP or kiosk operator) | The business correspondent | The BC, under reverse charge | Notif 13/2017-CT(R), S. No. 13 |
| BC or BF services for accounts in a rural area branch, and intermediaries to them | Banking company, or the BC or BF | Exempt, no GST | Notif 12/2017-CT(R), S. No. 39 |
| Sub-agent working under a DSA | The DSA (not a bank or NBFC) | The sub-agent, under forward charge, if registered | S. No. 11 applies only where the recipient is a bank or NBFC |
Source: Notification 13/2017-Central Tax (Rate) as amended by 15/2018 and 29/2018-Central Tax (Rate); Notification 12/2017-Central Tax (Rate)
Read the DSA entry closely. S. No. 11 covers "individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm". So reverse charge depends on your legal form. A proprietor is covered. The same business run as a private limited company isn't, and it charges GST to the bank on its own invoice.
The recovery entry is wider. S. No. 8 names "a recovery agent" with no exclusion, and the recipient can be a banking company, a financial institution or an NBFC. A collection agency run as a company still bills these clients without GST.
Sub-agents are a separate supply. If you're a DSA and you pay field executives or sub-agents a share of your payout, their service is to you, not to the bank. The reverse charge entry doesn't apply to it. A sub-agent with aggregate turnover under Rs 20 lakh simply bills you without GST; one above it registers and charges GST.
On your invoice. A reverse charge invoice still carries your details, the bank's GSTIN, the description and the value. Rule 46(p) of the CGST Rules needs it to state whether tax is payable on reverse charge basis. Write it on every commission bill so the lender's GST team can book it correctly.
Do you need GST registration as a DSA?
Here's the part most DSAs miss. Notification 5/2017-Central Tax, issued under Section 23(2) of the CGST Act, exempts "persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient" from registration.
Step-by-Step Guide
GST Registration Test for a Loan DSA or Recovery Agent
1. List every income stream
Bank and NBFC commission, recovery fees, BC payouts, and anything else: referral fees from builders or dealers, insurance commission, consulting fees.
2. Tag each stream
Reverse charge (S. Nos. 8, 11, 12 or 13 of Notification 13/2017-CT(R)), exempt (S. No. 39 of Notification 12/2017-CT(R)), or forward charge.
3. All reverse charge?
If every taxable supply is one where the recipient pays the whole tax, you're exempt from registration under Notification 5/2017-Central Tax, however large the commission.
4. Any forward charge income?
Add all streams, including reverse charge and exempt income, to get aggregate turnover under Section 2(6) of the CGST Act. Only tax on your own inward reverse charge purchases is left out.
5. Compare with the threshold
Above Rs 20 lakh in a financial year (Rs 10 lakh in some special category States), registration is compulsory under Section 22. Below it, you may stay unregistered.
Source: Notification 5/2017-Central Tax; Sections 2(6), 22 and 23, CGST Act 2017
Example. Ravi is an individual DSA in Hyderabad. In FY 2026-27 he earns Rs 26 lakh of commission from two banks and an NBFC. Every rupee is a reverse charge supply, so he doesn't need to register, even though Rs 26 lakh is above the Rs 20 lakh threshold.
Midway through the year, a builder starts paying him Rs 3 lakh of referral fees for home-buyer leads. That's a forward charge supply. Ravi is no longer "only engaged" in reverse charge supplies, and his aggregate turnover is Rs 26 lakh + Rs 3 lakh = Rs 29 lakh. He must register. He then charges 18% on the builder fees, Rs 54,000 on Rs 3 lakh, and keeps billing the banks without GST under reverse charge.
The 18% rate on Ravi's referral fees, and on a DSA company's bank invoices, is the standard 9% CGST plus 9% SGST (or 18% IGST) for the support and financial-agency service headings 9971 and 9985 under Notification 11/2017-Central Tax (Rate).
Registering voluntarily? You can, but think it through. A registered DSA whose only income is reverse charge has no output tax to set credit against, so input tax credit on a phone or laptop just piles up unused. You also take on monthly or quarterly returns.
Income tax: why DSAs can't use 44AD
Commission from a bank is business income. The catch is the presumptive scheme. Section 44AD(6)(ii) of the Income-tax Act 1961 excludes "a person earning income in the nature of commission or brokerage", and clause (iii) excludes "a person carrying on any agency business". Section 58(11)(a)(iv) and (v) of the Income-tax Act 2025 carry the same two bars from 1 April 2026. Section 44ADA doesn't help either: loan sourcing isn't a profession listed in Section 44AA(1) (Section 62(4) of the 2025 Act).
So you keep books and pay tax on actual profit.
Comparison
Income Tax Checklist for Commission Earners
| Rule | FY 2025-26 (1961 Act) | From 1 April 2026 (2025 Act) |
|---|---|---|
| Presumptive tax on commission | Not allowed, Section 44AD(6)(ii) | Not allowed, Section 58(11)(a)(iv) |
| Books of account (individual or HUF) | Section 44AA(2): income above Rs 2.5 lakh or turnover above Rs 25 lakh | Section 62(2)(d): same Rs 2.5 lakh and Rs 25 lakh limits |
| Tax audit | Section 44AB(a): turnover above Rs 1 crore (Rs 10 crore if cash receipts and payments are each within 5%) | Section 63, Table Sl. No. 1: same limits |
| TDS on commission you receive | Section 194H: 2%, above Rs 20,000 a year | Section 393(1), Table Sl. No. 1(ii): 2%, above Rs 20,000 |
| ITR form for an individual | ITR-3 (ITR-4 is only for presumptive income) | Forms under the Income-tax Rules 2026 |
Source: Income-tax Act 1961 (as amended by Finance Act 2025); Income-tax Act 2025 (as amended by Finance Act 2026)
Worked example (AY 2026-27). Take Ravi again, for FY 2025-26. His commission was Rs 26 lakh. He paid sub-agents Rs 6 lakh and spent Rs 4 lakh on fuel, phone, rent and staff. Profit: Rs 26 lakh - Rs 10 lakh = Rs 16 lakh. He has no other income and uses the new regime under Section 115BAC.
- Rs 0 to 4 lakh: nil.
- Rs 4 to 8 lakh at 5%: Rs 20,000.
- Rs 8 to 12 lakh at 10%: Rs 40,000.
- Rs 12 to 16 lakh at 15%: Rs 60,000.
- Tax: Rs 1,20,000. No Section 87A rebate, since income is above Rs 12 lakh. No marginal relief either: the tax of Rs 1,20,000 is less than the Rs 4 lakh by which income exceeds Rs 12 lakh.
- Health and education cess at 4%: Rs 4,800. Total: Rs 1,24,800.
- Less TDS by the banks, 2% of Rs 26 lakh: Rs 52,000. Balance: Rs 72,800, payable as advance tax in instalments during the year, or with interest at filing.
Notice what the sub-agent payouts did. Without bills and bank transfers to back the Rs 6 lakh, the profit and the tax would both be higher. That's why the books matter more for a DSA than for a shopkeeper on 44AD.
Your own TDS duty. For the year from 1 April 2026, you must deduct 2% on sub-agent commission above Rs 20,000 only if you're a "specified person". For an individual or HUF that means business turnover above Rs 1 crore in the previous year (Section 402(37), Income-tax Act 2025). A DSA company or firm is always a specified person.
Deadlines right now. If your FY 2025-26 accounts were audited, the return is due by 21 November 2026 (CBDT Circular 07/2026). If you weren't liable to audit and missed 31 July or 31 August, a belated return under Section 139(4) can be filed until 31 December 2026, with a late fee of Rs 5,000, or Rs 1,000 if total income is within Rs 5 lakh (Section 234F).
Common mistakes DSAs and recovery agents make
- Registering, then charging GST to the bank. If you're an individual DSA, the bank pays the tax. Adding 18% to your bill means the bank either rejects it or ends up paying twice while it sorts things out.
- Assuming the company structure doesn't matter. Converting a proprietorship DSA into a private limited company moves you from reverse charge to forward charge. Plan GST registration and invoicing before the switch, not after.
- Forgetting that one side income ends the exemption. A single builder or dealer referral fee means you're not "only" making reverse charge supplies. Then your bank commission counts towards the Rs 20 lakh threshold too.
- Filing on 44AD at 6% or 8%. The commission bar is explicit in both Acts. Keep books and file ITR-3.
- Not matching TDS with AIS. Lenders deduct under the commission section, sometimes under a contract or professional fees section. Check every deduction in Form 26AS and AIS lender by lender before you file, so no credit is left behind.
How Tax Garden helps commission earners
We start with the registration question: do you need a GSTIN at all, and if you do, which income goes on forward charge invoices and which on reverse charge bills. If you're crossing the threshold, our GST registration service gets you set up, and our GST return filing service handles monthly or quarterly returns. Our accounting and bookkeeping service keeps sub-agent payouts and expenses properly documented, and at year end we file through our ITR filing service.
For background, see our guides to reverse charge under GST, TDS on commission under Section 194H and Section 393, GST on commission agents and income tax for insurance agents.
