Section 194D of the Income Tax Act mandates that anyone making payments to resident insurance agents, brokers, or intermediaries for commission, remuneration, or rewards related to soliciting, procuring, renewing, or reviving insurance policies must deduct tax at source (TDS).
Who Must Deduct TDS?
- Payer: Any person or entity (individual, HUF, company, firm) paying insurance-related commissions to residents.
- Payees include: Insurance agents, brokers, advisors, or anyone earning such commissions.
- Non-residents? Not applicable here; such commissions fall under Section 195 .
When Is TDS Deducted?
Deduct TDS on the earlier of:
- When commission is credited to the payee’s account
- When it’s paid in cash or through any mode.
Threshold & Rates
- Threshold Limit (from April 1, 2025): No TDS if total commissions in FY ≤ ₹20,000 (previously ₹15,000).
- TDS Rates:
- Residents (non-company): 5% (going forward, may reduce to 2% per Budget 2024) .
- Domestic companies: 10%.
- Without PAN: 20%.
Exemptions & Lower Rate Requests
- Aggregate commission ≤ ₹20,000 in FY → no TDS.
- Agent files Form 15G/15H (if eligible) → no deduction.
- Payee can apply for lower or nil deduction via Form 13 under Section 197.
- PAN mandatory for certificates; absence leads to 20% TDS.
Compliance: Deposits, Returns & Certificates
- TDS deposit: By 7th of the next month (30th April for March).
- Return filing: Quarterly Form 26Q.
- TDS certificate: Form 16A issued by:
- 15th August for Apr–Jun
- 15th November for Jul–Sep
- 15th February for Oct–Dec
- 15th June for Jan–Mar.
Non‑compliance Consequences
- Interest penalty: ~1% per month from due date till actual deduction/deposit.
- TDS deposit defaults may attract further penalties under TDS rules.
Quick Snapshot
| Feature | Details |
|---|---|
| Who deducts | Any payer of insurance commission to a resident |
| Threshold | ₹20,000 per FY (from 1 Apr 2025) |
| Rates | 5% (individual/HUF), 10% (domestic company), 20% (no PAN) |
| Timing | At credit or payment, whichever first |
| Exemptions | ≤₹20k, Form 15G/H, Form 13 certificate |
| Compliance | Deposit by 7th, file Form 26Q, issue Form 16A |
| Penalty | 1% interest per month for delay |
Why It Matters
Section 194D ensures tax is reliably collected on commissions tied to insurance business. It applies to agents, brokers, and companies alike, with clear rules on rates, timing, exemptions, and compliance—even before payments are finalized.
