TDS on Insurance Commission [Sec.194D] – TDS Rate, Exemption, TDS Limit

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TDS on Insurance Commission [194D]: Any person responsible for paying to a resident any income by way of commission or otherwise for soliciting or procuring insurance business (including continuance or renewal of policies) shall, at the time of crediting the account of the payee or at the time of payment thereof, whichever is earlier deduct income-tax thereon. No deduction shall be made from the amount of any sum credited or paid if such sum does not exceed Rs.15,000.

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Applicability of TDS under Section 194D

Section 194D casts responsibility on any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including the business relating to the continuance, renewal, or revival of policies of insurance) to deduct tax at source.

TDS on Insurance Commission – Rate of TDS

Such a person is required to deduct income tax at the rate of 5%. In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation arising out of the COVID-19 pandemic, the rate of TDS u/s 194D has been reduced from 5% to 3.75% (i.e., 3⁄4th of the specified rate) for the period from 14th May 2020 to 31st March 2021[Section 197B].

The prescribed rate is 5% for individuals and HUF and 20% for the corporate assessee. No surcharge, cess shall be added from 1st October 2009. When the payee does not furnish his PAN to the deductor, the tax will be deducted with effect from 1st April 2010 @ 20%.

The benefit of self-declaration under this section has been extended to section 194D (w.e.f. June 1, 2017). No tax will be deducted under 194D if the recipient of the insurance commission submits Form No. 15G/15H to the Payer.

Payee Rate of TDS
Domestic Company 10%
Other Payee 5% [From 14-05-2020 to 31-03-2021: 3.75%]

TDS on Insurance Commission [194D] Time of deduction

The deduction is to be made at the time of the credit of the income to the account of the payee or at the time of making the payment (by whatever mode) to the payee, whichever is earlier.

TDS on Insurance Commission [194D]Threshold limit

The tax under this section has to be deducted at source only if the amount of such income or the aggregate of the amounts of such income credited or paid during the financial year to the account of the payee exceeds Rs. 15,000.

Who is responsible to deduct tax:

Any person is responsible for paying to a resident person any income by way of remuneration or reward (i.e. commission etc.) for soliciting or procuring insurance business including business relating to the continuance, renewal, or revival of policies of insurance.

Note: Tax shall not be deducted if the aggregate amounts of remuneration or reward credited or paid during the financial year to the payee do not exceed ` 15,000.

When tax shall be deducted:

At the time of payment or crediting the party whichever is earlier.

Exemption or relaxation from the provision

  • When the recipient applies to the Assessing Officer in Form 13 and gets a certificate authorizing the payer to deduct tax at a lower rate or deduct no tax; [Refer sec.197]
  • When a declaration in Form 15G (in duplicate) is furnished by the assessee to the payer [Refer sec.197A]