Tax for insurance agents and brokers in India

Insurance commission TDS under Section 194D fell to 2% for individuals (from 5%) on 1 April 2025, with the threshold raised to Rs 20,000 a year (a company is 10%). Commission is business income that can use neither presumptive scheme: an agent is not a specified profession (so not 44ADA), and commission income is specifically excluded from Section 44AD too, so an agent keeps books. A life-policy maturity is tax-free under Section 10(10D) only if the premium stayed within the caps (10% of sum assured; ULIP over Rs 2.5 lakh or non-ULIP over Rs 5 lakh lose it), and Section 194DA deducts 2% on a taxable maturity. The commission is 18% GST (often reverse-charge for individual agents), separate from the premium (individual cover is now nil-GST).

Presumptive + GST + TDS at a glance

Presumptive taxation

Section:: Sec None (commission income excluded from 44AD and 44ADA, books required)
Deemed profit rate:: N/A
Classification:: business

GST treatment

Slab:: 18%
SAC:: insurance commission/brokerage 18% (individual agent often reverse-charge, insurer pays); premium itself separate (individual health/life premium nil-GST from 22 Sep 2025)
Composition eligible:: No
Reverse charge (RCM):: Applicable

TDS exposure

Last reviewed: 29 May 2026

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Insurance distribution earns commission, and commission has its own tax treatment. The commission TDS under Section 194D fell to 2% for individuals (from 5%) on 1 April 2025, with the threshold raised to Rs 20,000 a year (a domestic company is 10%). Importantly, insurance commission is business income that can use neither presumptive scheme: it is not a specified profession (so not 44ADA), and commission income is specifically excluded from Section 44AD too, so an agent keeps books. Agents also need the policyholder rules: a life-policy maturity is tax-free under Section 10(10D) only if the premium stayed within the caps, and Section 194DA deducts 2% on a taxable maturity. The commission itself attracts 18% GST, distinct from the premium (individual premiums are now nil-GST).

What business structure do insurance agents and brokers use?

The common patterns for insurance agents and brokers are: Individual agent (Insurance Act s.42), representing one insurer per segment, Corporate agent or broker, for a firm or company distributing insurance, Web aggregator, for a comparison-platform business. The right structure depends on revenue, liability exposure, and personal circumstances, covered below.

Commission TDS (194D) and no presumptive scheme

Commission for soliciting or procuring insurance business, including renewal commission, overrides and incentives, attracts TDS under Section 194D. From 1 April 2025 the rate for an individual agent is 2% (down from 5%), with the threshold raised to Rs 20,000 a year; a domestic company is 10%, and 20% without PAN. The income is business income (PGBP), and it can use neither presumptive scheme: an agent is not a specified profession (so 44ADA does not apply), and commission and brokerage income is specifically excluded from Section 44AD as well. So an insurance distributor keeps proper books and declares actual profit.

Insurance commission has 194D TDS at 2% for individuals (from 5%, 1 April 2025) over Rs 20,000; it is business income that cannot use 44ADA or 44AD (commission is excluded from both), so books are required. (Income-tax Act 1961 s.194D (commission TDS, individual 2% from 1 April 2025) (Income-tax Act 2025 s.393); s.44AD (excludes commission/brokerage) + s.44ADA (specified professions only))

Policyholder rules: 10(10D) caps and 194DA maturity

Agents must understand the policyholder tax their clients face. A life-policy maturity is exempt under Section 10(10D) only if the premium stayed within the caps: broadly 10% of the sum assured for policies issued on or after 1 April 2012 (15% for disability or specified illness). On top of that, a ULIP issued on or after 1 February 2021 with aggregate annual premium over Rs 2,50,000, or a non-ULIP policy issued on or after 1 April 2023 with premium over Rs 5,00,000, loses the exemption (except the death benefit, which stays exempt). Where a maturity is taxable, Section 194DA deducts 2% (from 1 October 2024) on the income portion (payout less premiums) over Rs 1,00,000.

A life-policy maturity is exempt under 10(10D) only within the premium caps (10% of sum assured; ULIP over Rs 2.5 lakh or non-ULIP over Rs 5 lakh lose it); a taxable maturity has 194DA TDS at 2% on the income portion over Rs 1,00,000. (Income-tax Act 1961 s.10(10D) (exemption and premium caps; ULIP FA2021, non-ULIP FA2023) + s.194DA (maturity TDS 2% from 1 October 2024))

GST: commission is 18%, premium is separate

The commission an agent, broker or aggregator earns is taxed at 18% GST. For an individual agent, the insurer typically pays this under reverse charge (so the agent does not charge it), while a corporate agent, broker or web aggregator usually accounts for it under forward charge. This is the commission, and it is distinct from the premium the customer pays: individual health and life insurance premiums became nil-GST from 22 September 2025, but that change does not affect the 18% on the distributor's commission. Keep the two clearly separate in your accounting.

Insurance commission is 18% GST (often reverse-charge for individual agents, insurer pays); this is separate from the premium, where individual health/life cover became nil-GST from 22 September 2025. (CGST Act 2017 (commission 18%, reverse charge for individual agents); Reform 2.0 (individual insurance premium nil from 22 September 2025))

Allowable expenses

Category	Examples	Tax treatment
Office	Office or desk rent, electricity, internet	Deductible against commission income (books required)
Travel and client	Client visits, fuel, phone	Deductible (apportion personal use)
Licensing and training	IRDAI licence, examinations, CPD	Deductible business expense
Marketing	Lead generation, advertising, materials	Deductible business expense
Admin	Accounting, GST filing, software	Deductible business expense

Vehicle and travel costs

An agent travelling to clients can deduct vehicle running costs and depreciation against commission income on regular books; presumptive taxation is not available to commission income.

Capital allowances and equipment

On regular books, office equipment and computers depreciate (computers 40% WDV, furniture 15%). Presumptive taxation (44AD) is not available because commission income is excluded, so actual books and depreciation are the route.

Worked example

Sunita — Lucknow, UP

individual life-insurance agent (2026-27)

Annual commission Rs 12 lakh from one life insurer, including renewal commission. The insurer deducts 194D TDS at 2%.

Her commission is business income. She cannot use 44ADA (agency is not a specified profession) or 44AD (commission income is excluded from it), so she keeps books and declares her actual profit after expenses (office, travel, licence, marketing). The insurer deducts 194D at 2% (from 1 April 2025, the threshold being Rs 20,000), which she reclaims against her tax. On the GST side, her commission is 18% but the insurer pays it under reverse charge, so she does not charge GST on her commission; the premium her clients pay is separate (individual cover is now nil-GST).

Common audit triggers for insurance agents and brokers

Declaring commission under 44ADA (insurance commission is not a specified profession)
Declaring commission under 44AD (commission and brokerage are excluded from 44AD)
Applying the old 5% (instead of 2%) 194D rate for an individual agent
Treating a maturity over the premium caps as exempt under 10(10D)
Confusing the 18% commission GST with the now-nil individual-premium GST
194D commission in 26AS/AIS not reconciled with declared income

Frequently asked questions

What rate of TDS applies to my insurance commission?+

Under Section 194D, an individual agent is now deducted at 2% (down from 5% on 1 April 2025), and a domestic company at 10%, with 20% without PAN. The threshold was raised to Rs 20,000 a year. The TDS is a prepayment of your tax, you reclaim it against your final liability through your return, where you declare your actual commission profit.

Can an insurance agent use the presumptive scheme?+

No, neither scheme. An agent is not a specified profession, so Section 44ADA (50%) does not apply, and commission and brokerage income is specifically excluded from Section 44AD (6 or 8%) as well. So an insurance distributor must keep proper books of account and declare actual profit after expenses, presumptive taxation is simply not available to commission income.

Is a life-insurance policy maturity tax-free?+

Only within the caps. Under Section 10(10D), a maturity is exempt if the premium stayed within roughly 10% of the sum assured (for policies on or after 1 April 2012). But a ULIP issued on or after 1 February 2021 with aggregate annual premium over Rs 2.5 lakh, or a non-ULIP issued on or after 1 April 2023 with premium over Rs 5 lakh, loses the exemption (the death benefit always stays exempt). A taxable maturity has 194DA TDS at 2% on the income portion.

Do I charge GST on my insurance commission?+

The commission is 18% GST, but for an individual agent the insurer typically pays it under reverse charge, so you do not charge it yourself; a corporate agent, broker or aggregator usually accounts for it under forward charge. This is separate from the premium your clients pay, individual health and life insurance premiums became nil-GST from 22 September 2025, but that does not change the 18% on your commission.

Last reviewed: 29 May 2026