Referral Agreement in India: Template and Key Clauses (2026)

A referral agreement in India sets out the terms on which one party introduces potential customers to another and is paid for introductions that convert. Referral fees are lawful across most of the Indian economy, but some professions forbid them outright, and the tax treatment of commission has its own rules. This guide sets out the Indian law that applies, the key clauses, and a drafting skeleton. It is general information, not legal advice; take Indian advice before signing a live deal. ## What is a referral agreement in India? It is a contract between a referrer, who introduces prospective customers, and a recipient, who provides the goods or services and pays a fee or commission for qualifying referrals. The agreement defines what counts as a referral, when the fee is earned, how it is calculated, and how the parties behave towards each other and the customer. It is not an agency or partnership unless the parties intend that, so the drafting should make the nature of the relationship clear. ## What law and rules govern referral agreements in India? There is no single referral statute. The agreement rests on the Indian Contract Act 1872 and is then shaped by tax rules and sector bans: - Contract law. The Indian Contract Act 1872 governs formation, consideration and enforceability. A referral fee is valid consideration for a genuine introduction.

• Tax deducted at source (TDS). Commission or brokerage paid for a referral attracts TDS under section 194H of the Income-tax Act 1961, so the payer should deduct and deposit the correct amount.
• GST. A referral service is a supply, so Goods and Services Tax applies to the commission at the applicable rate where the referrer is registered. State whether figures include or exclude GST.
• Professional bans. Some professions prohibit referral fees. Advocates are barred from sharing fees with or paying touts under the Advocates Act 1961 and the Bar Council of India rules. Registered medical practitioners are prohibited from giving or taking commissions for referrals under the National Medical Commission professional conduct regulations, which treat such cut practice as misconduct. Check the profession before any fee is agreed.
• Financial products. Referrals of regulated financial products engage the rules of the relevant regulator, such as the Securities and Exchange Board of India for investment products and the Reserve Bank of India for certain banking and lending products.
• Data protection. Sharing a prospect's personal details engages India's data protection framework, including the Digital Personal Data Protection Act 2023 as it comes into force, so handle lead data lawfully and with notice. ## Key clauses in an India referral agreement - Definition of a referral: what counts, and when an introduction becomes a qualifying, fee-earning referral.
• Fee and payment: amount or percentage, trigger event, timing, TDS under section 194H and GST treatment.
• Clawback: whether a fee is returned if the underlying deal falls through.
• Exclusivity: whether the referrer may introduce to competitors.
• Compliance and sector rules: a warranty that the arrangement is permitted for the parties' professions.
• No authority: confirm the referrer cannot bind the recipient or make representations for it.
• Data protection: lawful handling of prospect data and any notice or consent required.
• Term and termination: duration, notice, and survival of fees for referrals already made.
• Stamp duty: note stamping as required in the relevant state.
• Governing law and dispute resolution. ## When a referral fee is not allowed The fee itself is rarely the issue for ordinary businesses. The problem is a profession that forbids it. If either party is an advocate or a registered doctor, assume a referral fee is prohibited and do not structure one. For regulated financial products, confirm the regulator's position. For everyone else, a transparent fee for a genuine introduction, with the correct TDS and GST, is standard and enforceable. ## A simple drafting skeleton 1. Parties and date

2. Definitions, including what counts as a referral
3. The referral service and how introductions are made
4. Fee, trigger event, payment timing, TDS (section 194H) and GST
5. Clawback and failed deals
6. Exclusivity (if any)
7. Compliance and sector warranties
8. No authority or partnership
9. Confidentiality and data protection
10. Term and termination
11. Stamp duty
12. Governing law and dispute resolution
13. Signatures ## Common mistakes to avoid - Paying a referral fee to or from an advocate or a registered doctor, where professional rules forbid it.

• Missing TDS under section 194H on commission, or getting the GST treatment wrong.
• Treating a regulated financial-product referral as an ordinary one and ignoring the regulator.
• Sharing prospect data without lawful notice under India's data protection framework. ## Keeping referral arrangements under control If you run many referral partners, the hard part is not one agreement. It is tracking which arrangements are allowed for which professions, how TDS and GST are handled, when each term ends, and which clawback terms apply. Drafting from a tuned template, flagging risky clauses per contract, and keeping versions straight is what an AI contract workspace can hold in one place. Adira is built for this, with per-clause risk review, plain-English clause editing and a live activity timeline. It is India-first, so Indian contract, tax and professional-conduct context is its home ground. More at Adira. The law above stands on its own. ## Bottom line A referral agreement in India is standard across most of the economy, built on the Indian Contract Act 1872. The first check is whether a fee is allowed for the professions involved, since advocates and registered doctors are barred. Then handle TDS under section 194H and GST, keep the fee tied to a genuine introduction, and take Indian advice before signing a real deal.