Section 194D: TDS on Insurance Commission
Section 194D of the Income-tax Act, 1961 governed tax deduction at source on insurance commission paid to residents. From 1 April 2026, the corresponding provisions appear in Section 393(1), Table for Payments to Resident, serial number 1(i), of the Income-tax Act, 2025.
Meaning of insurance commission
Insurance commission includes remuneration or reward, whether described as commission or otherwise, for soliciting or procuring insurance business. It also covers business connected with the continuance, renewal or revival of insurance policies. The provision focuses on the nature of the payment rather than merely its label.
Who must deduct TDS?
Any person responsible for paying qualifying insurance commission to a resident is covered. The provision extends to payments for new policies and renewals or revival of existing policies. Payments to non-residents require separate examination under the applicable non-resident withholding provisions.
Threshold, rate and timing
| Particular | Position |
|---|---|
| Income covered | Remuneration or reward for soliciting or procuring insurance business, including renewal, continuance or revival |
| Payee | Resident |
| Annual threshold | Rs. 20,000 per payee |
| When to deduct | At credit or payment, whichever is earlier |
| Applicable rate | Rates in force under the relevant Finance Act; verify the rate for the payment date and recipient category |
| Applicable section through 31 March 2026 | Section 194D, Income-tax Act, 1961 |
| Applicable section from 1 April 2026 | Section 393(1), resident payments table, serial number 1(i), Income-tax Act, 2025 |
Where the total commission paid, credited or expected to be paid or credited to a resident during the relevant year does not exceed Rs. 20,000, deduction is not required under this entry. When the threshold is exceeded, TDS generally applies to the qualifying commission, not merely the amount exceeding the threshold.
Example of insurance commission TDS
Suppose an insurer credits Rs. 12,000 to a resident insurance agent and later credits another Rs. 11,000 during the same year. The total is Rs. 23,000, exceeding the Rs. 20,000 threshold. The insurer should account for the applicable TDS on the commission under the relevant law and rate, including the effect of any earlier credits.
Transition to the Income-tax Act, 2025
The Income Tax Department clarifies that TDS is governed by the statute applicable when the earlier of credit or payment occurs. A commission credited in March 2026 but paid in April 2026 remains subject to the 1961 Act; a fresh credit or payment first arising in April 2026 is governed by the 2025 Act. The new Act consolidates non-salary TDS provisions in Section 393 without generally changing the thresholds and rates.
Compliance considerations
Deductors should verify the payee's residential status, PAN, the aggregate commission for the year, any valid lower or nil deduction certificate and the rates in force. Deposit and reporting obligations, TDS certificates and interest for delay must be followed under the law and rules applicable to the transaction. A higher rate may apply where the relevant PAN requirements are not met.
Historical provision and amendments
Section 194D was inserted by the Finance Act, 1973, and included a historical exemption for amounts credited or paid before 1 June 1973. Its threshold changed over time, including from Rs. 5,000 to Rs. 20,000 and Rs. 15,000 under earlier amendments. The Finance Act, 2025 increased the limit from Rs. 15,000 to Rs. 20,000 with effect from 1 April 2025. These earlier limits should not be used for current compliance.
Official legal sources
- Income Tax Department: Section 194D, Income-tax Act, 1961
- Income Tax Department: Section 393, Income-tax Act, 2025
- Income Tax Department: TDS compliance and transition FAQs
- Finance Bill 2025: Explanatory Memorandum
This article provides general legal information. Check the applicable Finance Act, rules and official notifications for the relevant transaction date.