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The 2-Minute Summary
Insurance agents earn commission for soliciting, procuring, and servicing insurance policies. This commission is taxable income and attracts TDS when it crosses Rs. 20,000 in a Tax Year from the same insurance company. The provision applies to all insurance: life, health, general, and any other form. Any remuneration or reward paid for soliciting or procuring insurance business, including renewals and revivals, is covered.
Example: An LIC agent earns Rs. 35,000 in total commission from LIC in Tax Year 2026-27. Since the amount exceeds Rs. 20,000, TDS at rates in force is deducted before the commission is paid. The agent receives the net amount and claims TDS credit in their ITR.
Under Income Tax Act 1961: Section 194D of the Income Tax Act 1961. Now Section 393(1) Sl. No. 1(i) under the 2025 Act. Threshold and scope unchanged.
At a Glance
| Item | Details |
| New Act Reference | Section 393(1), Sl. No. 1(i) of Income Tax Act 2025 |
| Old Act Reference | Section 194D of Income Tax Act 1961 |
| Who Deducts | Any person paying insurance commission |
| TDS Rate | 2% [10% if payee is domestic company] |
| Threshold | Rs. 20,000 aggregate per Tax Year |
| Covers | Commission for soliciting, procuring, renewal, revival of insurance policies |
| Form for TDS Certificate | Form 16A |
What is Covered
The scope of Sl. No. 1(i) is broad. It covers any income by way of remuneration or reward, whether called commission or anything else, for:
- Soliciting new insurance policies
- Procuring insurance business
- Business relating to the continuance, renewal, or revival of existing insurance policies
It does not matter what label is given to the payment. If it relates to the above activities in the insurance business, TDS applies once the annual total crosses Rs. 20,000.
Threshold: Annual Aggregate
Unlike lottery TDS (which is per transaction), insurance commission TDS is based on the annual aggregate from the same payer. TDS kicks in once total commission paid or credited to the agent in the Tax Year from a single insurance company exceeds Rs. 20,000.
Example: An agent earns Rs. 8,000 in Q1, Rs. 7,000 in Q2, and Rs. 9,000 in Q3 from the same insurer. Total after Q3 = Rs. 24,000, which crosses Rs. 20,000. TDS applies on the amount that takes the total above Rs. 20,000, and on all subsequent payments in that year.
Multiple Insurers
The threshold is applied separately for each insurance company. An agent earning Rs. 18,000 each from three different insurers has Rs. 54,000 in total commission, but no TDS is triggered because no single payer crossed Rs. 20,000. Each insurer independently tracks its own payments to the agent and applies TDS only when its own cumulative payment crosses Rs. 20,000.
Practical Compliance Checklist
- If you are an insurance agent: Track commission received from each insurer separately. Once any single insurer’s payment to you crosses Rs. 20,000, TDS will apply. Plan advance tax accordingly.
- If you receive commission from multiple insurers: Consolidate all your income at filing time. Each company will show TDS in Form 26AS. Claim all credits in your ITR.
- If you want to reduce or nil TDS: Apply for a lower deduction certificate under Section 395 if your total income is expected to result in lower tax than the rate applied.
- If your total income including commission is below the basic exemption limit: Submit Form 15G to the insurance company at the start of the year to avoid TDS deduction.
Insurance commission is a recurring income for active agents, and TDS management is part of the job. Filing Form 15G or applying for a lower TDS certificate at the start of the year ensures your monthly cash flow is not disrupted by large TDS deductions.
