CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194D — Insurance Commission (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Mechanical; lightly litigated.
Finance Act, 2026: No amendment.
Mechanism: The payer of remuneration/commission for soliciting or procuring insurance business to a resident deducts tax at the prescribed rate where the annual aggregate exceeds the threshold.
Litigation profile: Thin. Disputes concern the income/expenditure, not the deduction obligation — the candour rule applies.
A. SECTION COMMENTARY
Section 194D requires any person responsible for paying a resident, by way of remuneration or reward (whether by way of commission or otherwise) for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies), to deduct tax at the prescribed rate where the aggregate in a financial year exceeds the threshold. It is the deduction code for insurance-agency commission; the Finance (No.2) Act, 2024 reduced the rate for non-company payees from five to two per cent with effect from 1 April 2025.
Scope — 'by way of commission or otherwise'
The charge is on remuneration for soliciting or procuring insurance business; the words 'or otherwise' make the form of the reward immaterial, so long as it is for the agency service. The provision sits beside section 194DA (which deals with the maturity proceeds of a policy in the policyholder's hands) and should not be confused with it: section 194D is about the agent's commission, section 194DA about the insured's receipt.
Why direct authority is thin
Section 194D is mechanical and is seldom litigated on its own terms; disputes about insurance commission are generally about the allowability of the expenditure in the payer's hands or the taxability of the commission in the agent's hands, not about the deduction obligation. In candour, there is little section 194D merits authority; the cognate principles on commission and on default carry the analysis.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194D. 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 business relating to the continuance, renewal or revival of policies of insurance) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :
Provided that no deduction shall be made under this section from any such income credited or paid before the 1st day of June, 1973:
Provided further that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed twenty thousand rupees.
C. AUTHORITIES
Candour rule observed: section 194D generates little direct merits authority. Cognate principles are offered.
Cognate principles
Characterisation as 'commission' for soliciting business
Principle: What attracts section 194D is a payment that is, in substance, remuneration for soliciting or procuring insurance business; the label is immaterial ('commission or otherwise'). Where a payment is not for that service it falls outside section 194D.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor under section 201(1) where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194D.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194D — Insurance Commission (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Mechanical; lightly litigated.
Finance Act, 2026: No amendment.
Mechanism: The payer of remuneration/commission for soliciting or procuring insurance business to a resident deducts tax at the prescribed rate where the annual aggregate exceeds the threshold.
Litigation profile: Thin. Disputes concern the income/expenditure, not the deduction obligation — the candour rule applies.
A. SECTION COMMENTARY
Section 194D requires any person responsible for paying a resident, by way of remuneration or reward (whether by way of commission or otherwise) for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies), to deduct tax at the prescribed rate where the aggregate in a financial year exceeds the threshold. It is the deduction code for insurance-agency commission; the Finance (No.2) Act, 2024 reduced the rate for non-company payees from five to two per cent with effect from 1 April 2025.
Scope — 'by way of commission or otherwise'
The charge is on remuneration for soliciting or procuring insurance business; the words 'or otherwise' make the form of the reward immaterial, so long as it is for the agency service. The provision sits beside section 194DA (which deals with the maturity proceeds of a policy in the policyholder's hands) and should not be confused with it: section 194D is about the agent's commission, section 194DA about the insured's receipt.
Why direct authority is thin
Section 194D is mechanical and is seldom litigated on its own terms; disputes about insurance commission are generally about the allowability of the expenditure in the payer's hands or the taxability of the commission in the agent's hands, not about the deduction obligation. In candour, there is little section 194D merits authority; the cognate principles on commission and on default carry the analysis.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194D. 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 business relating to the continuance, renewal or revival of policies of insurance) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :
Provided that no deduction shall be made under this section from any such income credited or paid before the 1st day of June, 1973:
Provided further that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed twenty thousand rupees.
C. AUTHORITIES
Candour rule observed: section 194D generates little direct merits authority. Cognate principles are offered.
Cognate principles
Characterisation as 'commission' for soliciting business
Principle: What attracts section 194D is a payment that is, in substance, remuneration for soliciting or procuring insurance business; the label is immaterial ('commission or otherwise'). Where a payment is not for that service it falls outside section 194D.
Use: The gateway test for section 194D.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor under section 201(1) where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194D.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.