TDS on Insurance Commission: Section 194D / 393 Complete Guide for FY 2026-27
Key Takeaways
- Insurance companies must deduct TDS under Section 194D on commission, remuneration, or reward paid to insurance agents for soliciting or procuring insurance business.
- Threshold: Rs 20,000 per financial year per agent (raised from Rs 15,000 by Finance Act 2025, effective April 1, 2025). No TDS if aggregate commission stays below this limit.
- TDS rates for FY 2026-27: 2% for individuals and HUFs with PAN (reduced from 5%, effective April 1, 2025), 10% for companies with PAN, and 20% without PAN (Section 206AA).
- Insurance commission is excluded from Section 194H (general commission/brokerage). Section 194D is the specific provision for insurance intermediaries.
- Under the Income Tax Act 2025 (effective April 1, 2026), Section 194D maps to Section 393(1), Serial Number 1(I).
- Do not confuse Section 194D (TDS on insurance commission) with Section 194DA (TDS on life insurance maturity payouts). They are entirely different provisions.
- Agents must file TDS credit in ITR-3 (business income) or ITR-4 (if opting for Section 44ADA presumptive taxation).
If you are an insurance company, a corporate insurance agent, or any person paying commission to individuals who solicit or procure insurance business, Section 194D of the Income Tax Act 1961 requires you to deduct TDS before releasing the payment. From FY 2026-27, this provision falls under the consolidated Section 393 framework of the Income Tax Act 2025.
Insurance agents earn commission on every policy they sell, renew, or revive. For many agents, especially those operating as sole proprietors or small firms, these commissions are their primary income. The TDS deducted by the insurer forms a significant part of their advance tax obligation. Getting the rates, thresholds, and filing right is critical for both the insurer (deductor) and the agent (deductee).
Looking for expert help with TDS on insurance commission Section 194D rates thresholds India FY 2026-27? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
Who Deducts TDS Under Section 194D
The obligation to deduct TDS under Section 194D falls on the person responsible for paying insurance commission. In practice, this means:
| Entity | Liable to Deduct? |
|---|---|
| Life insurance companies (LIC, HDFC Life, ICICI Prudential, SBI Life, etc.) | Yes |
| General insurance companies (New India Assurance, ICICI Lombard, Bajaj Allianz, etc.) | Yes |
| Health insurance companies (Star Health, Niva Bupa, etc.) | Yes |
| Reinsurance companies paying commission to intermediaries | Yes |
| Corporate insurance agents paying sub-agents | Yes, if paying commission to sub-agents |
| Insurance brokers paying referral fees | Yes, if the payment qualifies as commission for procuring business |
Unlike Section 194H (general commission), there is no turnover threshold for the deductor under Section 194D. Every insurance company, regardless of size, must deduct TDS on commission payments exceeding the Rs 20,000 annual threshold.
What Payments Are Covered
Section 194D covers TDS on any income by way of remuneration or reward, whether by way of commission or otherwise, for:
- Soliciting insurance business (bringing new policyholders)
- Procuring insurance business (completing policy sales)
- Renewal commission (commission on existing policy renewals)
- Continuance commission (commission for keeping policies active)
- Revival commission (commission when lapsed policies are revived)
What Is Not Covered
- Salary paid to employees of the insurance company. Employee compensation is covered under Section 192.
- Commission to non-residents. TDS on payments to non-residents is governed by Section 195, not 194D.
- Life insurance maturity payouts. That is Section 194DA, a completely different provision.
TDS Rates and Threshold for FY 2026-27
Tax Rate Chart
Section 194D / 393(1) Sl. 1(I): TDS on Insurance Commission
Rates effective from April 1, 2025 onward, applicable for FY 2026-27
Individual / HUF with PAN
Reduced from 5% by Finance Act 2025, effective April 1, 2025
Company with PAN
Unchanged; applies to corporate insurance agents organized as companies
Without PAN (Section 206AA)
Flat 20% regardless of entity type; furnish PAN to the insurer immediately
Annual threshold per agent
Raised from Rs 15,000 by Finance Act 2025; no TDS if aggregate commission below this limit
Interest: failure to deduct
Per month from date TDS was deductible to date of actual deduction
Interest: failure to deposit
Per month from date of deduction to date of actual deposit with government
Source: Section 194D, Income Tax Act 1961; Section 393(1) Sl. 1(I), Income Tax Act 2025; Finance Act 2025; Section 206AA; Section 201(1A)
| Scenario | TDS Rate |
|---|---|
| Individual or HUF agent with valid PAN | 2% |
| Corporate agent (company) with valid PAN | 10% |
| Any agent without PAN (Section 206AA) | 20% |
How the Rs 20,000 Threshold Works
The Rs 20,000 limit is an aggregate threshold per agent per financial year. It applies to the total of all commission payments (first-year, renewal, revival, bonus) made to a single agent during the year.
Example:
| Month | Commission Payment | Cumulative Total | TDS Deducted |
|---|---|---|---|
| April 2026 | Rs 5,000 (renewal commission) | Rs 5,000 | Nil (below Rs 20,000) |
| July 2026 | Rs 8,000 (new policy commission) | Rs 13,000 | Nil (below Rs 20,000) |
| October 2026 | Rs 12,000 (new policy commission) | Rs 25,000 | Rs 500 (2% on Rs 25,000) |
| January 2027 | Rs 6,000 (renewal commission) | Rs 31,000 | Rs 120 (2% on Rs 6,000) |
When the threshold is breached in October, TDS is deducted on the entire cumulative commission of Rs 25,000. From that point, TDS at 2% applies on every subsequent payment.
Practical tip for agents: If you earn commission from multiple insurers, each insurer applies the Rs 20,000 threshold independently. A threshold breach with LIC does not affect your threshold with HDFC Life.
When to Deduct TDS
TDS under Section 194D must be deducted at the earlier of:
- Credit of the commission to the agent's account in the insurer's books (including suspense account or any other account), or
- Payment of the commission to the agent by any mode (cash, cheque, bank transfer, or any other method).
This "credit or payment, whichever is earlier" rule means that even if the insurer credits commission to the agent's account but has not yet released the payment, TDS is due at the time of credit.
Section 194D vs Section 194DA: Do Not Confuse
This is one of the most common mix-ups in insurance TDS compliance.
Comparison
Section 194D vs Section 194DA: Insurance Commission vs Insurance Payout
| Parameter | Section 194D (Commission) | Section 194DA (Maturity Payout) |
|---|---|---|
| What is taxed | Commission, remuneration, or reward paid to insurance agents for procuring business | Income component of life insurance maturity or surrender proceeds paid to policyholders |
| Who deducts | Insurance company paying commission to agents | Life insurance company paying maturity/surrender amount to policyholders |
| Who is the deductee | Insurance agent, broker, or intermediary | Policyholder receiving maturity or surrender value |
| TDS rate (with PAN) | 2% (individual/HUF), 10% (company) | 5% on the income component (maturity minus premiums paid) |
| Threshold | Rs 20,000 aggregate per year per agent | Rs 1,00,000 aggregate per year per policyholder |
| Section 393 mapping | Section 393(1), Sl. 1(I) | Separate provision under Income Tax Act 2025 |
| ITR form for recipient | ITR-3 or ITR-4 (business income) | ITR-1 or ITR-2 (income from other sources or capital gains) |
Takeaway: Section 194D applies to the agent earning commission. Section 194DA applies to the policyholder receiving a maturity or surrender payout. They are different sections, different rates, different thresholds, and different recipients.
Section 194D vs Section 194H: Why Insurance Commission Is Separate
Insurance agents sometimes wonder why their commission does not fall under Section 194H, the general provision for commission and brokerage. The answer: Section 194H explicitly excludes insurance commission. Section 194D is the specific (lex specialis) provision for the insurance industry.
| Aspect | Section 194D (Insurance) | Section 194H (General) |
|---|---|---|
| Scope | Commission for insurance business only | All other commission and brokerage (real estate, advertising, FMCG distribution, etc.) |
| Rate (Individual/HUF) | 2% | 2% |
| Threshold | Rs 20,000 | Rs 20,000 |
| Deductor | Insurance companies only | Any person paying commission (with turnover above Rs 1 crore or profession receipts above Rs 50 lakh for individuals/HUFs) |
| Why separate | Insurance regulatory framework, IRDAI commission structures, and the volume of agent payments required a dedicated section | General catch-all for principal-agent commission |
From FY 2026-27, the rate and threshold are identical for both sections. The distinction matters primarily for correct section citation on TDS returns, payment codes, and Form 16A.
Section 393 Under the Income Tax Act 2025
From April 1, 2026, the Income Tax Act 2025 consolidates all non-salary TDS provisions into Section 393. Section 194D is mapped to Section 393(1), Serial Number 1(I).
| Aspect | Before April 1, 2026 (IT Act 1961) | From April 1, 2026 (IT Act 2025) |
|---|---|---|
| Section number | 194D | Section 393(1), Sl. 1(I) |
| TDS rate (Individual/HUF) | 2% | 2% (unchanged) |
| TDS rate (Company) | 10% | 10% (unchanged) |
| Threshold | Rs 20,000 | Rs 20,000 (unchanged) |
| Return form | Form 26Q | Form 26Q (to be migrated to new form numbers under the 2025 Act) |
| Payment code | Old code for 194D | New payment code under Section 393 framework |
The underlying rules remain the same. Only the section reference, payment code, and eventual form numbers change.
Compliance Workflow for Insurance Companies
Step-by-Step Guide
TDS Compliance Steps for Insurers Under Section 194D / 393
Track Cumulative Commission Per Agent
Maintain agent-wise records of all commission payments (first-year, renewal, revival, bonus) during the financial year. Flag agents whose cumulative total approaches Rs 20,000.
Verify PAN of Every Agent
Collect and validate PAN from every insurance agent. Without PAN, TDS jumps to 20% under Section 206AA. Cross-check PAN against the income tax department's PAN verification tool.
Deduct TDS at Credit or Payment
Deduct TDS at the earlier of crediting commission to the agent's account or making the payment. Apply 2% for individual/HUF agents with PAN, 10% for corporate agents with PAN, or 20% if PAN is missing.
Deposit TDS by the 7th of Next Month
Deposit the deducted TDS to the government account by the 7th of the month following the month of deduction. For March deductions, the deadline is 30th April.
File Quarterly TDS Return (Form 26Q)
File Form 26Q quarterly with details of all TDS deductions under Section 194D. Due dates: Q1 (Apr-Jun) by 31st July, Q2 (Jul-Sep) by 31st October, Q3 (Oct-Dec) by 31st January, Q4 (Jan-Mar) by 31st May.
Issue Form 16A to Each Agent
Generate and issue Form 16A (TDS certificate) to each agent within 15 days of the due date for filing the quarterly return. Download from the TRACES portal after filing Form 26Q.
Source: Section 194D, Income Tax Act 1961; Section 393(1), Income Tax Act 2025; Rule 31 (TDS certificate timelines)
TDS Deposit Due Dates
| Month of Deduction | Deposit Due Date |
|---|---|
| April to February | 7th of the following month |
| March | 30th April |
Quarterly Return Filing Due Dates
| Quarter | Period | Form 26Q Due Date |
|---|---|---|
| Q1 | April to June | 31st July |
| Q2 | July to September | 31st October |
| Q3 | October to December | 31st January |
| Q4 | January to March | 31st May |
For Insurance Agents: How to Handle TDS on Your Commission
Check Form 26AS and AIS
Every quarter, after the insurer files Form 26Q, the TDS deducted from your commission appears in your Form 26AS and Annual Information Statement (AIS) on the income tax portal. Verify that the TDS amounts match the commission statements issued by the insurer and the Form 16A you receive.
Which ITR Form to Use
| Situation | ITR Form |
|---|---|
| Agent reporting commission as business income (regular computation) | ITR-3 |
| Agent opting for presumptive taxation under Section 44ADA (50% of gross receipts deemed as income) | ITR-4 |
| Agent who is also a salaried employee with commission as side income | ITR-3 (salary + business income cannot use ITR-1 or ITR-2) |
Section 44ADA for Insurance Agents
Insurance agents whose total gross commission receipts do not exceed Rs 75 lakh in the financial year can opt for presumptive taxation under Section 44ADA. Under this scheme, 50% of gross receipts is deemed as taxable income, and no books of accounts are required.
Example: An agent earns Rs 12 lakh in total commission during FY 2026-27. Under Section 44ADA, taxable income from profession is Rs 6 lakh (50% of Rs 12 lakh). The agent files ITR-4 and declares this amount. TDS of Rs 24,000 (2% on Rs 12 lakh) already deducted by the insurer is claimed as credit against the tax liability.
Lower Deduction Certificate (Section 197)
If your actual income tax liability for the year is lower than the TDS being deducted (for example, your total income falls below the taxable threshold after deductions), you can apply to the Assessing Officer for a lower deduction certificate under Section 197. Once issued, the insurer deducts TDS at the rate specified in the certificate (which can be nil or a lower percentage).
How to apply: File Form 13 on the TRACES portal. The AO processes the application and issues a certificate valid for the remainder of the financial year.
Consequences of Non-Compliance for Insurers
| Default | Consequence |
|---|---|
| Failure to deduct TDS | 30% disallowance of the commission payment as a business expense under Section 40(a)(ia). Plus, the insurer is treated as an "assessee in default" under Section 201. |
| Late deduction of TDS | Interest at 1% per month from the date TDS was deductible to the date of actual deduction. |
| Late deposit of TDS after deduction | Interest at 1.5% per month from the date of deduction to the date of deposit. |
| Failure to file Form 26Q on time | Late filing fee of Rs 200 per day under Section 234E (capped at the total TDS amount). |
| Penalty for failure to deduct | Penalty equal to the TDS amount not deducted, under Section 271C. Prosecution possible under Section 276B for failure to deposit. |
Common Mistakes and How to Fix Them
Mistake 1: Applying Section 194H Instead of 194D
Insurance commission is specifically covered under Section 194D. Citing Section 194H on the TDS return for insurance commission payments will result in mismatched payment codes and potential notices from the CPC.
Fix: Always use the Section 194D payment code for insurance commission. Under the 2025 Act, use the Section 393(1), Sl. 1(I) code.
Mistake 2: Not Deducting TDS on Renewal and Revival Commission
Some insurers deduct TDS only on first-year commission and overlook renewal, continuance, and revival commission. All forms of commission for procuring or maintaining insurance business are covered.
Fix: Include all commission types (first-year, renewal, revival, bonus, and incentive payments linked to policy procurement) in the TDS computation.
Mistake 3: Agent Not Furnishing PAN
Without PAN, TDS is deducted at a flat 20% instead of 2%. Many agents, especially those new to the profession, do not furnish PAN to the insurer and lose 18% more of their commission to TDS.
Fix: Furnish PAN to every insurer you work with. If you have already had 20% deducted, file your ITR to claim the excess TDS as a refund.
Mistake 4: Not Reconciling Form 26AS with Commission Statements
Agents sometimes file ITR without verifying that the TDS shown in Form 26AS matches the actual commission received. Mismatches lead to demand notices or refund delays.
Fix: Before filing ITR, download Form 26AS and AIS from the income tax portal. Compare every entry with the commission statements and Form 16A received from each insurer. Flag discrepancies with the insurer for correction via a revised TDS return.
Tax Garden Handles Your Insurance TDS Compliance
Tax Garden's TDS filing plans cover end-to-end compliance for insurance companies: agent-wise commission tracking, correct Section 194D/393 rate application, monthly TDS deposit, quarterly Form 26Q filing, and Form 16A generation through TRACES. For agents, Tax Garden files ITR-3 or ITR-4 with proper TDS credit reconciliation.
For related topics, see our guides on TDS on commission and brokerage (Section 194H), TDS rate chart for FY 2026-27, TDS on salary (Section 192), tax on life insurance maturity (Section 194DA), Section 44ADA presumptive taxation for professionals, new TDS payment codes for FY 2026-27, and the Income Tax Act 2025 section mapping guide.
Frequently Asked Questions
Is TDS under Section 194D applicable on performance bonuses paid to insurance agents?
Yes. Any remuneration or reward paid to an agent in connection with soliciting or procuring insurance business is covered under Section 194D. This includes performance bonuses, club membership rewards, trip incentives, and any other payment linked to insurance procurement. The Rs 20,000 threshold applies to the aggregate of all such payments to a single agent during the year.
Can an insurance agent claim TDS refund if total income is below the taxable limit?
Yes. If your total income (after deductions under Chapter VI-A) falls below the basic exemption limit, the entire TDS deducted is refundable. File your ITR (ITR-3 or ITR-4) declaring your income and claim the TDS credit. You can also apply for a lower or nil deduction certificate under Section 197 to prevent excess TDS in subsequent years.
Does Section 194D apply to commission paid to insurance brokers licensed by IRDAI?
Yes. Section 194D applies to any person receiving commission or remuneration for procuring insurance business, whether they are an individual agent, a corporate agent, or a licensed insurance broker. The entity paying the commission (insurer or intermediary) must deduct TDS at the applicable rate.
What happens if the insurer deducts TDS under the wrong section (194H instead of 194D)?
The agent may face issues during ITR processing because the TDS payment code will not match. The insurer should file a correction return (revised Form 26Q) on TRACES to change the section from 194H to 194D. If the rates are identical (both are 2% for individuals), the financial impact may be nil, but the compliance records should be corrected to reduce exposure to notices.
Is GST applicable on insurance agent commission in addition to TDS?
Yes, separately. Insurance agents whose aggregate turnover exceeds Rs 20 lakh (Rs 10 lakh for special category states) must register for GST. Insurance agent services attract GST at 18% on the commission amount. TDS under Section 194D is an income tax provision; GST is a separate compliance. The insurer deducts TDS on the commission amount before GST, i.e., on the base commission excluding GST.
How is TDS calculated when the insurer pays both commission and GST to the agent?
TDS under Section 194D is deducted on the commission amount excluding GST, provided the GST component is separately indicated in the invoice or payment voucher. If the agent raises an invoice for Rs 10,000 commission plus Rs 1,800 GST (total Rs 11,800), TDS at 2% is deducted on Rs 10,000 (TDS = Rs 200), not on Rs 11,800. This is consistent with CBDT Circular No. 23/2017.
Can an insurance agent opt for both Section 44ADA and claim business expenses?
No. Section 44ADA is a presumptive scheme where 50% of gross receipts is deemed as taxable income, and no separate deduction for business expenses is allowed. If your actual expenses exceed 50% of gross receipts (or you want to claim specific deductions), opt out of 44ADA, maintain books of accounts, and file ITR-3 with actual profit and loss computation.
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Sources
This guide is verified against Section 194D of the Income Tax Act, 1961 (TDS on insurance commission, as amended by Finance Act 2025), Section 393(1) Serial Number 1(I) of the Income Tax Act, 2025 (consolidated non-salary TDS table, effective April 1, 2026), Finance Act 2025 (revision of threshold from Rs 15,000 to Rs 20,000 and rate reduction from 5% to 2% for individuals/HUFs, effective April 1, 2025), Section 206AA (higher TDS rate for missing PAN), Section 40(a)(ia) (30% disallowance for non-deduction), Section 197 (lower deduction certificate), Section 201(1A) (interest on late deduction/deposit), Section 234E (late filing fee for TDS returns), Section 271C (penalty for failure to deduct), Section 44ADA (presumptive taxation for professionals), CBDT Circular No. 23/2017 (TDS on GST component), and IRDAI regulations on insurance agent commission structures. Rates, thresholds, and procedural details confirmed from incometax.gov.in, TRACES, ClearTax, Tax2win, and CAClubIndia reference materials as of June 2026. All rates and thresholds should be verified against incometax.gov.in/iec/foportal/ before applying to specific transactions.
