Insurance agents often hear about section 194d when they talk about tax. The rule deals with tax deducted at source (TDS) on the commission they earn. From 1 April 2026 the same rates and limits continue, but the provision is now called Section 393(1), Table serial 1(i) of the Income Tax Act, 2025.
What is Section 194D and what is the TDS rate on insurance commission in 2026? Section 194d (now Section 393(1), Table serial 1(i)) requires the insurer to deduct TDS on any commission paid to a resident agent. The rate is 2% for individuals and HUFs, 10% for domestic companies, and 20% if the agent does not furnish PAN. The rule applies once the total commission to an agent in a financial year exceeds Rs 20,000.
What is Section 194D?
Section 194D of the Income Tax Act, 1961 deals with tax deducted at source on insurance commission. It covers commission paid for:
- Soliciting new business
- Procuring insurance business
- Renewing an existing policy
- Reviving a lapsed policy
- Bonus commission on policies sold or renewed
The provision applies only when the commission is paid to a resident agent. Payments to non-resident agents fall under Section 195 instead.
In simple words: when an insurance company pays commission to its agent, it does not hand over the full amount. It keeps back a small part as TDS and deposits it with the government. The agent gets credit for that TDS when filing the income tax return. TDS on insurance commission is one of the many TDS provisions — the same idea applies to contractor and professional payments under Sections 194C and 194J and to e-commerce payments under Section 194O.
Section 194D at a glance
| Fact | Detail |
|---|---|
| What it covers | TDS on insurance commission paid to resident agents |
| Rate — individual / HUF | 2% (from 1 April 2025) |
| Rate — domestic company | 10% |
| Rate — no PAN furnished | 20% (Section 206AA) |
| Threshold | Rs 20,000 aggregate commission per agent per financial year (from 1 April 2025) |
| When to deduct | Earlier of credit to the agent’s account or actual payment |
| New section (from 1 April 2026) | Section 393(1), Table serial 1(i), Income Tax Act, 2025 |
| TDS certificate | Form 16A (becomes Form 131 from 1 April 2026) |
| Quarterly TDS return | Form 26Q (becomes Form 140 from 1 April 2026) |
What is the TDS rate under Section 194D in 2026?
| Payee type | TDS rate | Note |
|---|---|---|
| Individual / HUF | 2% | Reduced from 5% on 1 April 2025 |
| Domestic company | 10% | Unchanged |
| No PAN supplied (Section 206AA) | 20% | Applies to any payee type |
The 5% rate that existed earlier was cut to 2% from 1 April 2025 under the Finance Act, 2024. The change stayed the same when the provision moved to Section 393(1) in 2026. The 10% rate for domestic companies did not change.
Why does the rate matter? For a part-time agent earning a few lakh rupees a year in commission, the difference between 5% and 2% is real money kept in hand each month. At the same time, TDS is only an advance payment of tax — it is not an extra tax. If the agent’s total tax for the year is lower than the TDS deducted, the extra comes back as a refund.
What is the Rs 20,000 threshold under Section 194D?
TDS is not required if the aggregate commission paid to one agent in a financial year does not exceed Rs 20,000. The limit includes first-year, renewal, revival and bonus commissions together. It is counted per agent, per financial year, and per payer.
The threshold was raised from Rs 15,000 to Rs 20,000 from 1 April 2025 by the Finance Act, 2025. Small agents who earn only a little commission in a year may not face any TDS at all.
Example 1 — No TDS
An agent receives commissions of Rs 5,000, Rs 8,000 and Rs 5,000 during the year. Total = Rs 18,000. Because the total is below Rs 20,000, the insurer does not deduct any TDS.
Example 2 — TDS on the full amount
Another agent earns Rs 20,000, Rs 30,000 and Rs 10,000. Total = Rs 60,000. Since the total exceeds the threshold, TDS is deducted on the whole Rs 60,000 at 2% = Rs 1,200. The tax is not limited to the amount above Rs 20,000. This is the point most agents get wrong — once the limit is crossed, the full commission is taxed, not just the part above Rs 20,000.
Example 3 — Company agent
A corporate insurance agent (a private limited company) earns Rs 5,00,000 in commission in the year. The rate for a domestic company is 10%, so the TDS is Rs 50,000.
Example 4 — No PAN
An agent earns Rs 60,000 in commission but has not given PAN to the insurer. The rate jumps to 20% under Section 206AA, so the TDS is Rs 12,000 instead of Rs 1,200. Giving PAN to the insurer is the simplest way to avoid this.
Who deducts TDS under Section 194D?
The person paying the commission — normally the insurance company — must deduct TDS.
- There is no turnover test for the insurer. Every insurer must deduct once the Rs 20,000 limit is crossed. Size does not matter.
- The rule applies only to resident agents. For non-resident agents, Section 195 is used.
- The deductor can also be a corporate agent or any other person who pays commission for procuring insurance business — the duty sits with whoever makes the payment, not only with insurance companies.
When is TDS deducted under Section 194D?
TDS must be deducted at the earlier of:
- The date the commission is credited to the agent’s account in the insurer’s books, or
- The date the commission is actually paid (cash, cheque, electronic transfer, or any other mode).
Example — An insurer credits Rs 30,000 commission on 10 April but pays it on 25 April. TDS is deducted on 10 April, the earlier date. Booking the commission in the accounts is enough to trigger the deduction; the insurer cannot wait until the money is actually sent.
What is not covered by Section 194D?
| Not covered | Reason |
|---|---|
| Reinsurance commission | Specifically excluded by the law |
| Payments to non-resident agents | Governed by Section 195 |
| Commission below Rs 20,000 in a year | Threshold rule — no TDS at all |
| Salary paid to an insurer’s employee | Salary is covered by Section 192, not 194D |
Only the commissions listed above are subject to TDS under this section. A salary, a reimbursement of expenses, or a payment to a non-resident does not come under it.
Section 194D vs Section 194DA
Section 194DA is the sister provision. It deals with payouts under a life insurance policy — maturity amount, surrender value, or bonus — where the payout is not exempt under Section 10(10D). The two sections are easy to mix up, but they cover different payments.
| Provision | What it covers | TDS rate | Threshold |
|---|---|---|---|
| Section 194D (now 393(1) Sl. 1(i)) | Commission for soliciting, renewing, reviving or bonus on insurance policies | 2% (individual/HUF), 10% (company), 20% (no PAN) | Rs 20,000 per agent per FY |
| Section 194DA | Taxable life-insurance payouts (maturity, surrender, bonus) not exempt under Section 10(10D) | 2% (reduced from 5% on 1 October 2024) | Rs 1,00,000 per payee per FY |
Both provisions are for insurance-related payments, but 194D deals with commission while 194DA deals with policy payouts. An agent can face both: commission on policies sold comes under 194D, and a maturity payout on the agent’s own policy that is not exempt under Section 10(10D) comes under 194DA. Our ULIP taxation guide explains how the 10(10D) exemption and the 2% 194DA TDS work on maturity payouts.
Section 194D vs Section 194H
- Section 194D — specific to insurance commission. No turnover test for the payer. Applies once the Rs 20,000 limit is crossed.
- Section 194H — applies to all other commissions and brokerage. For individuals and HUFs, it applies only if their turnover from business exceeded Rs 1 crore (or Rs 50 lakh from profession) in the preceding financial year. It also has a Rs 20,000 threshold, and the same 2% rate for individuals/HUFs and 10% for companies from 1 April 2025.
So 194D is the simpler rule for insurers, with no turnover test at all. 194H is the broader rule for general commission and brokerage, where the payer’s turnover decides whether it applies. Insurance commission is kept out of 194H because 194D already covers it.
How can an insurance agent avoid or reduce TDS?
- Form 15G — for agents whose total income is below the taxable limit.
- Form 15H — same as 15G, but for senior citizens (age 60 and above).
- Section 197 certificate — a lower or nil deduction certificate obtained from the Assessing Officer.
Submitting any of these forms before the insurer deducts tax can stop or reduce TDS. The form must reach the insurer in time — a form given after the TDS is already deducted cannot undo that deduction, though the agent can still claim the credit in the return. For the full step-by-step on these forms, see our guide on Form 15G and 15H to avoid TDS.
How does an agent claim TDS credit?
- The deducted amount appears in Form 26AS and the Annual Information Statement (AIS).
- While filing the income tax return, the agent reports the commission as business income and mentions the TDS amount as tax already paid.
- The credit reduces the tax payable. If the TDS is higher than the tax liability, the excess is refunded after the return is processed.
- The insurer must also issue a TDS certificate — Form 16A — to the agent. From 1 April 2026 this certificate becomes Form 131. It is issued within 15 days of the due date of the quarterly TDS statement. For the July–September quarter, the statement is due 31 October, so the certificate is due by 15 November.
- Before filing, the agent should match the certificate against Form 26AS and the AIS. If an entry is missing, the agent should ask the insurer to correct the TDS return first — a mismatch can delay the refund.
What changed in 2025 and 2026?
| Date | Change |
|---|---|
| 1 October 2024 | Section 194DA rate fell from 5% to 2%. |
| 1 April 2025 (Finance Act, 2024) | TDS rate for individuals/HUF under 194D fell from 5% to 2%. |
| 1 April 2025 (Finance Act, 2025) | Threshold raised from Rs 15,000 to Rs 20,000. |
| 1 April 2026 (Income Tax Act, 2025) | Section 194D becomes Section 393(1), Table serial 1(i) — rates and threshold unchanged. |
| 1 April 2026 | Form 16A becomes Form 131 (TDS certificate). |
| 1 April 2026 | Form 26Q becomes Form 140 (quarterly TDS return). |
TDS deducted in a month must be deposited by the 7th of the next month (for March deductions, by 30 April). Late deduction attracts interest at 1% per month, and late deposit at 1.5% per month, under Section 201(1A).
Common mistakes agents and insurers make
- Assuming TDS is due only on the amount above Rs 20,000. The tax is on the full commission once the limit is crossed.
- Using the old 5% rate after 1 April 2025. The correct rate is 2% for individuals and HUFs.
- Forgetting that no PAN triggers a 20% rate, even for small commissions.
- Mixing up Section 194D with Section 194DA — the former is for commission, the latter for policy payouts.
- Treating the threshold as per payment instead of per agent per year. Ten small payments of Rs 5,000 each add up to Rs 50,000, and TDS applies to the whole amount.
Frequently asked questions
What is Section 194D of the Income Tax Act?
Section 194D is the provision that requires TDS on insurance commission paid to resident agents for soliciting, procuring, renewing or reviving insurance business. From 1 April 2026 it is Section 393(1), Table serial 1(i) of the Income Tax Act, 2025.
What is the TDS rate on insurance commission in 2026?
2% for individuals and HUFs, 10% for domestic companies, and 20% if PAN is not furnished. The 2% rate has applied since 1 April 2025.
What is the threshold limit for TDS under Section 194D?
Rs 20,000 of aggregate commission per agent in a financial year. Below that, no TDS is deducted. Once the total crosses Rs 20,000, TDS applies to the full commission, not only to the part above the limit.
Who is responsible for deducting TDS under Section 194D?
The person who pays the commission — normally the insurance company. There is no turnover test for the deductor under this section.
When is TDS deducted under Section 194D — at credit or at payment?
At the earlier of the date the commission is credited to the agent’s account in the insurer’s books or the date it is actually paid.
Is TDS deducted on reinsurance commission?
No. Reinsurance commission is excluded from Section 194D.
Can an insurance agent avoid TDS with Form 15G or 15H?
Yes, if the agent’s total income is below the taxable limit. Form 15G is for other agents, and Form 15H is for senior citizens. A lower or nil deduction certificate under Section 197 is another route.
What is the difference between Section 194D and Section 194DA?
194D deals with commission on selling or renewing policies, with a Rs 20,000 threshold. 194DA deals with taxable life-insurance payouts such as maturity or surrender amounts, with a Rs 1,00,000 threshold. Both now charge 2% TDS.
How can an agent claim credit for TDS deducted under Section 194D?
The agent checks Form 26AS and the AIS for the TDS entry, reports the commission as income in the ITR, and claims the TDS as tax already paid. Any excess over the tax due comes back as a refund.
Does Section 194D apply to non-resident agents?
No. Payments to non-resident agents are covered by Section 195, not Section 194D.
Official sources
- Income Tax Department, e-filing portal — https://www.incometax.gov.in
- Income Tax Department, TDS rates and forms — https://www.incometaxindia.gov.in
- Finance Act, 2024 and Finance Act, 2025 — rate and threshold changes for Section 194D
- Income Tax Act, 2025, Section 393(1), Table serial 1(i) — new home of Section 194D from 1 April 2026
Closing
Section 194D (now Section 393(1), Table serial 1(i)) is a key rule for every insurance agent in India. The 2% rate and the Rs 20,000 threshold keep the burden light for small agents, but the full-amount rule and the 20% no-PAN rate can still catch people out. Keep your PAN updated with the insurer, check Form 26AS before filing, and the process will be smooth.
Reviewed by Asuthod Rathod, CA. Last updated: 8 November 2026.
Disclaimer: This article is for general information only and is not tax advice. Tax rules change with every Budget — check the latest provisions on the Income Tax Department portal or consult a chartered accountant before acting.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.