1How is a staffing agency's income taxed?
On your service fee or margin — not on pass-through payroll you bill to clients. Separate the two so taxable income reflects your real margin, not gross billings.
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ArticleRecruiters and staffing agencies earn service income, often after TDS, and staffing firms also handle large pass-through payroll. Getting your actual margin right is where the tax saving lies. Here's how recruitment businesses can save tax and stay compliant.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
Recruitment is a service business with TDS and (for staffing) pass-through payroll — so expense claims, clean margins and advance tax matter. Here's how.
If you run a staffing agency that pays deployed workers' salaries and bills clients for them, that payroll is pass-through — not your income. Keep your service fee or margin separate from pass-through payroll so your taxable income reflects your real margin, not gross billings.
A recruitment service business may use 44AD (declare 8%, or 6% on digital receipts, within Rs 2 crore) if eligible, or keep books and claim actual expenses. Staffing firms with large pass-through payroll usually keep books, since presumptive on gross billings would massively overstate income.
Deduct office rent, recruiter salaries, job-board and ATS subscriptions, communication, marketing and travel. For a recruitment business these are real and directly reduce taxable income when you keep books.
Clients deduct TDS on your fees (in your 26AS) — claim full credit. As a staffing employer you also deduct TDS on the salaries you pay; handling your own TDS correctly keeps those costs allowable and avoids disallowance.
On your personal return, use 80C, the Rs 50,000 NPS and 80D health insurance in the old regime. Estimate income after costs and pay advance tax in the four instalments if your tax exceeds Rs 10,000, to avoid 234B/234C interest.
On your service fee or margin — not on pass-through payroll you bill to clients. Separate the two so taxable income reflects your real margin, not gross billings.
A recruitment service business may, if turnover is within Rs 2 crore — but staffing firms with large pass-through payroll usually keep books , since presumptive on gross billings would overstate income.
Office rent, recruiter salaries, job-board and ATS subscriptions, communication, marketing and travel , when you keep books — directly reducing taxable income.
Running a recruitment or staffing business? Write to the firm and we'll separate your margin cleanly and keep TDS right.