What is Commission?
Nexa Consultancy | Startup & Finance Glossary
A commission is a fee paid to an agent or employee for transacting a piece of business or performing a service. It is a common form of compensation for sales teams, designed to incentivize performance.
For Startups: For a startup with a sales team, commission is a significant component of the Customer Acquisition Cost (CAC). A well-structured commission plan aligns the interests of the sales team with the company's revenue goals. In accounting, commission is recorded as an operating expense.
Tax Impact: In India, payments for commission are subject to Tax Deducted at Source (TDS) under Section 194H of the Income Tax Act if the annual payment exceeds a certain threshold.
Example: A SaaS startup pays its salesperson a 10% commission on the first-year contract value of every new deal they close.