TDS on Insurance Commission: Exemptions & Filing Rules

Introduction

Insurance agents and intermediaries earn commission for procuring, renewing, continuing or reviving insurance policies. When the total payment crosses the prescribed limit, the payer must deduct tax before releasing or crediting the income. Therefore, TDS on Insurance Commission is an important compliance requirement for insurance companies, corporate agents, brokers and insurance agents.

From 1 April 2026, TDS on Insurance Commission is governed by Section 393(1), Table Serial Number 1(i), of the Income-tax Act, 2025. It covers remuneration or reward, whether called commission or otherwise, for soliciting or procuring insurance business. It also includes payments connected with the continuance, renewal or revival of insurance policies. The prescribed threshold is ₹20,000 during the relevant tax year.

Disclaimer: Up to 31 March 2026, TDS on Insurance Commission was governed by Section 194D of the Income-tax Act, 1961. From 1 April 2026, the corresponding provision is Section 393(1), Table Serial Number 1(i), of the Income-tax Act, 2025. Section 194D remains relevant for transactions governed by the earlier law. Section 393 applies under the new framework because the Income-tax Act, 2025 came into force on 1 April 2026.

Meaning of TDS on Insurance Commission

TDS on Insurance Commission means tax withheld from remuneration or reward earned through insurance-related business. The payer deducts the prescribed amount and deposits it with the Central Government on behalf of the recipient.

The payment may be described as commission, incentive, reward or remuneration. Its real nature is more important than the label used. Where it is connected with procuring, continuing, renewing or reviving a policy, Section 393 may apply.

The deduction is an advance tax credit that the recipient may claim while filing the income-tax return, subject to correct deposit and reporting.

Payments Covered Under Section 393

TDS on Insurance Commission may apply to income earned for:

• Soliciting new insurance business
• Procuring life, health or general insurance policies
• Continuing an existing policy
• Renewing an insurance policy
• Reviving a discontinued or lapsed policy
• Receiving a reward directly linked with insurance business

The provision may apply even if the payment is not expressly called commission. However, every payment made by an insurance company does not automatically fall under this entry. Salary, professional fees, contractual payments and genuine reimbursements may be covered by other provisions based on their actual nature.

Correct classification is therefore the first step in TDS on Insurance Commission compliance.

Who Must Deduct TDS?

Any person paying covered insurance commission to a resident must examine the deduction requirement. This may include insurance companies, brokers, corporate agents and other intermediaries.

Before deducting TDS on Insurance Commission, the payer should verify residence, legal status, PAN, aggregate commission and any valid declaration or certificate. Payments to non-residents require separate examination.

Threshold for TDS on Insurance Commission

The threshold for TDS on Insurance Commission is ₹20,000 during the relevant tax year. The payer must consider the amount or aggregate of amounts credited or paid to the same recipient during that year.

Individual payments cannot be examined separately. For example, suppose an agent receives ₹8,000, ₹7,000 and ₹10,000 during the same tax year. The aggregate payment is ₹25,000. Since the total exceeds ₹20,000, the payer must apply the relevant TDS treatment.

The ₹20,000 amount is only a threshold for determining the deduction obligation. It is not an exemption that is subtracted from the commission. Once the limit is crossed, tax must be calculated according to the applicable provision and rates in force.

Rate of TDS on Insurance Commission

Section 393 provides that tax must be deducted at the rates in force. Therefore, the payer should check the rate schedule applicable to the relevant tax year and the legal status of the recipient.

The rate may also be affected by a valid lower or nil deduction certificate or by the recipient’s failure to provide a valid PAN. The payer should verify these details before the commission is credited or paid instead of applying a standard rate to every recipient.

When Should TDS Be Deducted?

TDS on Insurance Commission must be deducted at the earlier of:

• Credit of the income to the recipient’s account; or
• Actual payment through cash, cheque, bank transfer or another mode.
• Section 393 states that the obligation arises at credit or payment, whichever occurs earlier.

For example, when commission is credited on 28 June but paid on 10 July, deduction must be considered on 28 June. Credit to a suspense or commission payable account may also trigger the obligation.

Exemptions and No-Deduction Situations

The law mainly provides situations where TDS on Insurance Commission is not required or may be deducted at a lower or nil rate.

Commission Within ₹20,000

No deduction is required when aggregate covered commission does not exceed ₹20,000 during the tax year. However, the payer must monitor later payments because the obligation may arise when the cumulative amount crosses the limit.

Declaration for No Deduction

A resident individual may furnish the prescribed declaration when the estimated tax on total income for the tax year is nil, subject to statutory conditions. Insurance commission is specifically included among the payments for which such a declaration may be furnished.

Under the new forms framework, Form 121 replaces Forms 15G and 15H. The declaration does not make the commission tax-free. It only permits non-deduction when the prescribed conditions are satisfied.

Lower or Nil Deduction Certificate

A recipient may apply for a certificate authorising deduction at a lower rate or without deduction. Under the new forms framework, Form 128 replaces the earlier Form 13 application.

The payer should verify the certificate’s validity period, rate, payment category and recipient details before relying on it.

Practical Calculation

Suppose a resident individual insurance agent earns commission of ₹80,000 and the applicable rate is 2%.

The calculation is: ₹80,000 × 2% = ₹1,600

Since the amount exceeds ₹20,000, TDS on Insurance Commission applies. The payer deposits ₹1,600 and pays ₹78,400 to the agent. The recipient may claim the deducted amount as tax credit after correct reporting.

Filing Rules for TDS on Insurance Commission

Deduction is only one part of compliance. The payer must also deposit the tax, report the transaction and issue the prescribed certificate.

Verify PAN and TAN

The payer should validate the recipient’s PAN and quote its Tax Deduction and Collection Account Number in the applicable challans, statements and certificates. Incorrect details can cause higher deduction, statement errors and tax-credit mismatches.

Deposit the Deducted Tax

The tax deducted must be deposited with the Central Government within the prescribed period. Before deposit, the payer should reconcile the recipient’s name, PAN, commission amount, deduction date, rate and tax amount.

File Form 140

Under the new forms framework, Form 140 replaces Form 26Q for non-salary TDS reporting. TDS on Insurance Commission should be reported with the recipient’s PAN, amount credited or paid, applicable rate, deduction date and challan details.

The payer should reconcile Form 140 with its commission ledger and tax payment records before filing.

Issue Form 131

Form 131 replaces Form 16A as the certificate for non-salary TDS under the new framework. It should correctly show the commission amount, rate, tax deducted, deposit details and recipient information.

Reconcile Form 168

Form 168 replaces the earlier Form 26AS tax credit statement. The recipient should check whether TDS on Insurance Commission appears correctly. If the entry is missing or incorrect, the payer may need to file a correction statement.

Compliance Errors Commonly Made

Common mistakes include:

• Checking each payment separately instead of the annual aggregate
• Treating ₹20,000 as a deduction from commission
• Applying the wrong rate
• Deducting on payment even though credit occurred earlier
• Using Section 194D instead of Section 393
• Reporting an incorrect PAN or challan

A payee-wise register can reduce errors in TDS on Insurance Commission by tracking cumulative commission, threshold status, deduction and deposit.

Section 194D and Section 393 Comparison

Earlier references remain relevant when they relate to periods governed by the Income-tax Act, 1961. Current compliance records should use the provision and forms applicable under the Income-tax Act, 2025.

Compliance Checklist for TDS on Insurance

Before completing TDS on Insurance Commission compliance, the payer should:

• Identify covered insurance payments.
• Verify residence, legal status and PAN.
• Track cumulative commission and the ₹20,000 threshold.
• Check any declaration or lower deduction certificate.
• Apply the correct rate and deduction date.
• Deposit the tax within the prescribed period.
• File Form 140 and issue Form 131.
• Reconcile Form 168 and preserve records.

Simplify TDS Filing with Experts

Managing TDS on Insurance Commission requires careful checking of the threshold, recipient status, applicable rate and reporting details. A small error in PAN, challan information or return filing can lead to tax-credit mismatches and compliance issues.

Ebizfiling can assist with TDS calculation, tax payment, Form 140 filing, Form 131 compliance and correction of reporting errors. Our experts help insurance companies, intermediaries and agents complete their TDS obligations accurately and on time.

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Conclusion

TDS on Insurance Commission is now governed by Section 393(1), Table Serial Number 1(i), of the Income-tax Act, 2025. It applies to covered remuneration or rewards paid to residents when the aggregate amount exceeds ₹20,000 during the tax year.

The payer must classify the payment correctly, monitor the threshold, verify the recipient’s status and apply the correct rate. Timely deposit, Form 140 filing, Form 131 issuance and Form 168 reconciliation are also necessary.

A clear distinction must be maintained between the earlier and current laws. Section 194D governed TDS on Insurance Commission under the Income-tax Act, 1961, while Section 393 applies under the Income-tax Act, 2025 from 1 April 2026.

Frequently Asked Questions