TDS on Insurance Commission: Section 194D / 393 Complete Guide for FY 2026-27
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).
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:
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)
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:
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.
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.
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).
The underlying rules remain the same. Only the section reference, payment code, and eventual form numbers change.
Compliance Workflow for Insurance Companies
TDS Deposit Due Dates
Quarterly Return Filing Due Dates
For Insurance Agents: How to Handle TDS on Your Commission
Check Form 26AS and AIS
Every quarter, after the insurer files Form 140, 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
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
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 140 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.
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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.
