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Section 194D – TDS on Insurance Commission

Updated on :  

08 min read.

Insurance can go a long way when it comes to mitigating the financial crunch caused due to medical emergencies. Therefore, it is advisable to take an insurance policy not only for oneself but for one’s dependents as well. Most times people choose their insurance via agents, brokers, etc. In such cases, the insurance commission or any other remuneration/reward received by such agents, brokers etc., are subjected to Tax Deducted at Source (TDS) as dictated under Section 194D of the Income Tax Act.  

Latest updates on TDS under Income Tax law

Union Budget 2022 updates

  • New Section 194S- A person is liable for Tax Deduction at Source (TDS) at 1% at the time of payment of the transfer of virtual digital assets.
  • Sale of immovable property under Section 194-IA- It is proposed to amend the amount on which TDS should be deducted. The person buying the property should deduct tax at 1% on the sum paid/credited or the stamp duty value of such property, whichever is higher.
  • New Section 194R- TDS at 10% should be deducted by any person who provides perks or benefits, whether convertible into money or not, to any resident for carrying out any business or profession by such resident.

Eligibility of deduction under Section 194D

The tax must be deducted by the entity who makes the payment to the resident person, as remuneration/ rewards, by the way of commission or for the following purposes:

  • Soliciting or obtaining insurance business
  • Continuance, renewal or revival of policies of insurance.

Note that this provision applies from 1st June 1973 onwards.

When is TDS deducted under Section 194D?

The deduction of tax on insurance commission under Section 194D based on which of the following comes earlier:

  • Tax is deducted at the time of credit of commission in the account of the payee, or
  • The payment is in cash or cheque or kind.

What is the rate of TDS under Section 194D

Section 194D is applicable for all such payments made to a resident whether they are an individual, company or any other category of persons. The rate of TDS are mentioned below:

DetailsRate of TDS
Persons other than a company5%
Domestic Company10%

The TDS rate under section 194D was 3.75% for non-company deductees and 10% for domestic company deductees for payments from 14th May 2020 until 31st March 2021.

  • Surcharge or SHEC will not be added to these rates. Therefore, the tax will be deducted at the source at the basic rates mentioned above.
  • The rate of TDS will be 20% in cases where the deductee has not quoted PAN.

When is TDS not liable to be deducted under 194D

There are two instances when TDS is not deducted under Section 194D:

  • Commission paid does not exceed Rs.15,000
  • Self-declaration under Form 15G/ 15H

Non-deduction or a low rate of tax deduction

An individual who receives a commission can make an application in Form 13 to the Assessing Officer for a certificate authorising the payer not to deduct any tax or to deduct tax at a lower rate. In accordance with section 206AA(4), no certificate under Section 197 for non-deduction or a lower rate of deduction will be given unless the application also provides the PAN of the applicant.  

Due date to deposit TDS under section 194D

The due date to collect and deposit tax deducted on commission paid to insurance agents is 7th of next month.

Due dates for issuing TDS certificates

The deductee/ recipient will receive TDS certificates summarising the insurance commission payments and the TDS thereon. The due dates for receipt of TDS certificates are mentioned below:  

MonthsDeadline for issuing the Certificate
April – June15th August
July – September15th November
October – December15th February
January – March15th June

The due date for TDS returns for Q1 and Q2 of FY 2020-21 was extended to 31st March 2021. Accordingly, the due date to issue TDS certificates was 15th April 2021.

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