Section 194D: Insurance commission
Any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business which including business relating to the continuance, renewal or revival of policies of insurance shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.
In simple terms, under this section insurance companies like LIC, HDFC Insurance, ICICI Insurance etc. are liable to deduct TDS from The Payment of Insurance Commission to insurance agents.
Who is required to deduct TDS Section 194D?
Any person who pays to resident an income in the form of remuneration or reward as commission or otherwise for generating insurance business. And the time deduction is earlier of, the credit of income to the account of the payee (receiver) or actual payment in cash, cheque, draft or other modes.
Threshold limit for TDS
Amount or the aggregate amounts > Rs. 20,000 from financial year 2025-26 before its Rs. 15,000.
Payer
The person responsible for paying income by way of remuneration or reward for soliciting or procuring insurance business.
Payee
Any Resident
Rate of TDS
- Other than company - 2% (5% from financial year 2024 – 25) if the payee is a non-corporate resident.
- 10% if the payee is a domestic company.
- 20% if the deductee PAN number of deductee is not available.
No TDS
If the amount of such income whether individually or in aggregate for the financial year does not exceed Rs. 15,000 or if Form 15G or 15H has been received then no TDS section 194D is required.
Time of Deduction
At the time of credit of such income to the account of the payee or at the time of payment whichever is earlier.
- Credit given to account
- Actual payment mode
- Whichever is earlier
Deposit of TDS
Tax deducted by an office of Government
- Without an income tax challan – deposit on the same day
- With an income tax challan – deposit within 7 days from the end of the month in while the deduction is made
Others Deductors
- If credited or paid in march – 30th April
- With an income tax challan – deposit within 7 days from the end of the month in while the deduction is made
Quarterly statement filing (rule 31a) and furnishing certificate of TDS (rule 31)
- Payer must submit a quarterly statement (Form 26Q) for tax deducted at source
- Payer must furnish certificate of TDS in Form 16A within 15 days from the due date for furnishing TDS statement
|
Quarter |
Due
date for statement filing |
Deadline
for issuing certificate |
|
April – June |
31st July |
15th August |
|
July – September |
31st October |
15th November |
|
October – December |
31st January |
15th February |
|
January – March |
31st May |
15th June |
FAQ's
What is Section 194D of the Income Tax Act?
Section 194D mandates Tax Deducted at Source (TDS) on insurance commissions or rewards paid to resident individuals or entities for soliciting, procuring, continuing, renewing, or reviving insurance business.
Who must deduct TDS under Section 194D?
Any person (e.g., insurance company or other payer) responsible for paying insurance commission to a resident payee must deduct TDS before payment or at the time the income is credited to the payee’s account (whichever is earlier).
Who is the payee under this section?
A resident person who receives income by way of insurance commission or reward — such as an insurance agent, broker, or intermediary.
What is the threshold for TDS under Section 194D?
TDS is applicable only if the aggregate amount of insurance commission paid or credited in a financial year exceeds ₹20,000 (from FY 2025-26 onwards). Previously, the threshold was ₹15,000.
What happens if the payee doesn’t provide PAN?
If the deductee does not provide a valid PAN, TDS must be deducted at a higher rate of 20%.
Practical Insight: Make sure you track annual commission totals and PAN details before paying insurance commissions so you deduct the right TDS rate on time and avoid penalties.
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