Affiliate payouts in India: TDS, GST, and getting it right

Affiliate payout compliance is not complicated so much as it is unowned. Marketing sets the rate, engineering builds the ledger, and nobody asks what happens when a payment leaves the company.

What this article is and is not

Written by people who build attribution and payout tooling, not by tax professionals. It sets out the shape of the obligations and the questions worth taking to a chartered accountant, so that conversation is shorter and better informed.

Nothing here is tax advice. Rates and thresholds in this area have been amended repeatedly through recent Finance Acts, so every figure your CA gives you supersedes every figure in any article, including this one.

The reason to read it anyway is that the workflow design decisions come before the tax questions, and getting the workflow wrong makes the tax questions harder to answer later.

The two regimes, kept separate

Two distinct things happen when you pay an affiliate, and conflating them is the usual source of confusion.

The first is income tax withholding: your obligation to deduct tax at source before paying, and to report what you deducted.

The second is GST: the affiliate’s obligation, if any, to charge tax on the service they supplied to you, and your treatment of that.

They have different triggers, different thresholds and different owners. A program can engage one and not the other.

TDS: the commission question

Affiliate commission is generally treated as commission or brokerage, which engages Section 194H of the Income Tax Act, 1961.

Three variables decide what actually happens: the rate, the annual threshold below which no deduction is required, and whether the recipient has furnished a PAN.

All three have moved. Section 194H rates and thresholds have been amended through recent Finance Acts, including changes in 2024 and 2025, which is why this article deliberately does not print a number. Ask your CA for the figure applicable to the financial year you are paying in.

The practical consequence for program design is the threshold. A program with many small payouts and few large ones may sit below the threshold for almost every participant, while one with a handful of high earners crosses it for those individuals. That is a design choice you are making when you set the commission structure, whether or not you realise it.

TDS: the in-kind question

This is the least settled part and the one worth raising first.

Section 194R, inserted by the Finance Act 2022, addresses benefits or perquisites provided in kind rather than in cash. Whether store credit issued as a referral reward falls within it depends on the specific characteristics of the credit and on facts about your program.

The characteristics that matter, and that your CA will ask about: whether the credit is transferable, whether it can be converted to cash directly or indirectly, whether it expires, and whether it is capped.

SB&R is a Shopify app for chained referral rewards. Every referral link belongs to someone who has already bought. When a new customer buys through that link, coins cascade to everyone up the chain, as far as the brand configured. Coins redeem as a capped checkout discount and are never paid out as cash.

Non-transferable, non-cash and capped are all relevant facts. They are not a conclusion, and a brand that assumes store credit carries no obligations because no money moved has assumed rather than asked.

GST: whose obligation is it

An affiliate promoting your products and receiving commission is supplying a service. The standard rate for such services is 18%.

Whether GST is actually charged depends on the affiliate’s own position. Registration under GST turns on turnover thresholds that vary by state category and supply type, and an individual customer earning a few thousand rupees a year in referral rewards is nowhere near them.

This is why most customer-affiliate programs never see a single invoice, while a program built on professional publishers sees them constantly. The two populations have different obligations, and the same program run across both produces two entirely different compliance workloads.

Where an affiliate is registered, you receive a tax invoice and treat the input in the normal way. Where they are not, you do not, and the record of that fact is the thing to keep.

The cash payout workflow, with deduction points

Six steps, four of which involve documentation.

Commission is earned when the referred order settles. Nothing happens yet.

Deduction point 1. Before payment, verify identity and collect PAN details, because the withholding treatment depends on it.

Deduction point 2. Check cumulative payments to that person for the financial year against the applicable threshold, since the obligation depends on the running total rather than on the individual payment.

Deduction point 3. Deduct at the applicable rate where required, and record the deduction against that person.

Payment is made, net of any deduction.

Deduction point 4. Deposit what was deducted and issue the deduction certificate on the applicable timeline.

Then reconcile the payout against the ledger, which is where most brands discover that their affiliate dashboard and their bank statement disagree.

Every one of those four points is a place where a program with 300 affiliates becomes a job for a person.

The store credit workflow, compared

One documentation point, not four.

Coins are issued when the referred order settles. They are held in an append-only ledger. They redeem as a capped discount at checkout, and no money leaves the company at any stage.

There is no bank verification, no failed transfer, no deposit deadline and no reconciliation against payout rails.

The remaining point is the in-kind question above, plus keeping a per-person record of value issued in a financial year so that the question can be answered if it is asked.

The operational simplification is genuine and large. It is not the same as having no obligations, and the distinction matters because the simplicity is what tempts brands to skip the conversation entirely.

Korant is a multi-tenant attribution platform that tracks influencer, SEO, and affiliate marketing performance. Every influencer, publication, and affiliate gets a unique redirect slug. Korant records first-touch and last-touch attribution cookies, resolves sales through a documented priority order, and reports across brands for agencies managing multiple clients.

Korant is not for stores with a single paid channel, or for brands that only need Shopify’s native reports. The reason it belongs in a compliance discussion at all is that the per-partner record of what was earned and when is the input to every question above, and a program that cannot produce that record per person per financial year has a documentation problem before it has a tax problem.

The five questions for your CA

Take these five, with your payout table and a worked example of one order.

Does our commission structure engage Section 194H, and what are the current rate and threshold for this financial year.

Does store credit issued under our program engage Section 194R, given that it is non-transferable, non-cash, capped and expiring.

At what point in our workflow does the obligation arise: issuance, confirmation, or redemption.

What records do we need to keep per affiliate per financial year, and for how long.

What changes if we start paying professional publishers in cash alongside customers in credit.

The last one catches most brands out, because programs rarely stay one shape. A customer program that adds five paid publishers has acquired a second compliance workload without anyone filing a ticket for it.