The insurer deducted tax on my agency commission even though it was under twenty thousand rupees for the year. What is the s.194D threshold, and which year does my case fall in?
Section 194D obliges any person paying a resident 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 — to deduct at the rates in force, at credit or payment, whichever is earlier. The second proviso stops deduction where the amount of such income, or the aggregate of the amounts credited or paid or LIKELY to be credited or paid during the financial year to the payee, does not exceed twenty thousand rupees on the departmental page stamped Year 2026; the pages stamped Year 2020 and Year 2023 print fifteen thousand rupees, and the pages stamped Year 2012 and Year 2014 print twenty thousand rupees, substituted for five thousand by the Finance Act, 2010 with effect from 1 July 2010.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2010-07-01, reported as Income-tax Act, 1961, s.194D, as printed on the departmental page stamped Year 2026. It bears on section 194D, section 194DA, section 194G, section 195 of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
Two things about this section trip people up. The first is the word 'likely'. The threshold proviso is not a wait-and-see rule: it disapplies deduction only where the amount credited or paid, or LIKELY to be credited or paid, during the financial year does not exceed the threshold. An insurer who knows from the agent's book that the year's commission will cross the figure cannot decline to deduct on the first small payment on the footing that the threshold has not yet been reached. The second is that s.194D states no rate at all. It says 'at the rates in force', which means Part II of the First Schedule to the relevant Finance Act — so a rate quoted from a commentary or from another section is worth nothing here and the practitioner must go to the Finance Act for the year. The threshold itself has gone up, down and up again — five thousand rupees, then twenty thousand from 1 July 2010, then fifteen thousand on the pages stamped 2020 and 2023, then twenty thousand again on the Year 2026 page — so the single most important step is to fix the financial year before quoting a figure. Note finally that the section is confined to a RESIDENT payee and to remuneration for soliciting or procuring insurance business; commission on the sale of lottery tickets has its own section in s.194G, and a payment under a life insurance policy is s.194DA and not this section.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
Read aloud by your device. Press again to stop.
The section as printed on the live page reads: 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. First proviso: no deduction shall be made under this section from any such income credited or paid before the 1st day of June, 1973. Second proviso: 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. The section was inserted by the Finance Act, 1973 with effect from 1 April 1973; the threshold proviso was inserted by the Finance Act, 1987 with effect from 1 June 1987.
As printed on the Year 2026 departmental page: the duty is on any person paying a resident remuneration or reward for soliciting or procuring insurance business, including continuance, renewal or revival business; the deduction point is credit or payment, whichever is earlier; the rate is the rate in force under the Finance Act and is not stated in the section; and no deduction is made where the amount credited or paid, or likely to be credited or paid, during the financial year does not exceed twenty thousand rupees. The threshold read five thousand rupees on the pages up to Year 2009, twenty thousand rupees on the Year 2012 and Year 2014 pages after the Finance Act, 2010 substitution effective 1 July 2010, fifteen thousand rupees on the Year 2020 and Year 2023 pages, and twenty thousand rupees again on the Year 2026 page.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with such amendment history as those pages' footnotes carry. No judicial reasoning is involved.
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.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppSection 194D obliges any person paying a resident 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 — to deduct at the rates in force, at credit or payment, whichever is earlier. The second proviso stops deduction where the amount of such income, or the aggregate of the amounts credited or paid or LIKELY to be credited or paid during the financial year to the payee, does not exceed twenty thousand rupees on the departmental page stamped Year 2026; the pages stamped Year 2020 and Year 2023 print fifteen thousand rupees, and the pages stamped Year 2012 and Year 2014 print twenty thousand rupees, substituted for five thousand by the Finance Act, 2010 with effect from 1 July 2010. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 194D, section 194DA, section 194G, section 195 of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.194D, as printed on the departmental page stamped Year 2026. Two things about this section trip people up. The first is the word 'likely'. The threshold proviso is not a wait-and-see rule: it disapplies deduction only where the amount credited or paid, or LIKELY to be credited or paid, during the financial year does not exceed the threshold. An insurer who knows from the agent's book that the year's commission will cross the figure cannot decline to deduct on the first small payment on the footing that the threshold has not yet been reached. The second is that s.194D states no rate at all. It says 'at the rates in force', which means Part II of the First Schedule to the relevant Finance Act — so a rate quoted from a commentary or from another section is worth nothing here and the practitioner must go to the Finance Act for the year. The threshold itself has gone up, down and up again — five thousand rupees, then twenty thousand from 1 July 2010, then fifteen thousand on the pages stamped 2020 and 2023, then twenty thousand again on the Year 2026 page — so the single most important step is to fix the financial year before quoting a figure. Note finally that the section is confined to a RESIDENT payee and to remuneration for soliciting or procuring insurance business; commission on the sale of lottery tickets has its own section in s.194G, and a payment under a life insurance policy is s.194DA and not this section. If it applies to you, the first step is this: Fix the financial year, then take the threshold for that year — and do not quote twenty thousand rupees for a year in which the departmental text read fifteen thousand.
The section as printed on the live page reads: 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. First proviso: no deduction shall be made under this section from any such income credited or paid before the 1st day of June, 1973. Second proviso: 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. The section was inserted by the Finance Act, 1973 with effect from 1 April 1973; the threshold proviso was inserted by the Finance Act, 1987 with effect from 1 June 1987. The matter was decided on 2010-07-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. As printed on the Year 2026 departmental page: the duty is on any person paying a resident remuneration or reward for soliciting or procuring insurance business, including continuance, renewal or revival business; the deduction point is credit or payment, whichever is earlier; the rate is the rate in force under the Finance Act and is not stated in the section; and no deduction is made where the amount credited or paid, or likely to be credited or paid, during the financial year does not exceed twenty thousand rupees. The threshold read five thousand rupees on the pages up to Year 2009, twenty thousand rupees on the Year 2012 and Year 2014 pages after the Finance Act, 2010 substitution effective 1 July 2010, fifteen thousand rupees on the Year 2020 and Year 2023 pages, and twenty thousand rupees again on the Year 2026 page.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with such amendment history as those pages' footnotes carry. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "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."
It was decided by the CBDT Circulars & Instructions on 2010-07-01 and is reported as Income-tax Act, 1961, s.194D, as printed on the departmental page stamped Year 2026. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 194D, section 194DA, section 194G, section 195, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. As printed on the Year 2026 departmental page: the duty is on any person paying a resident remuneration or reward for soliciting or procuring insurance business, including continuance, renewal or revival business; the deduction point is credit or payment, whichever is earlier; the rate is the rate in force under the Finance Act and is not stated in the section; and no deduction is made where the amount credited or paid, or likely to be credited or paid, during the financial year does not exceed twenty thousand rupees. The threshold read five thousand rupees on the pages up to Year 2009, twenty thousand rupees on the Year 2012 and Year 2014 pages after the Finance Act, 2010 substitution effective 1 July 2010, fifteen thousand rupees on the Year 2020 and Year 2023 pages, and twenty thousand rupees again on the Year 2026 page. It arises in TDS Defaults and How Tax Law Is Read matters, on section 194D, section 194DA, section 194G, section 195 of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Apply the 'likely to be credited or paid' limb at the start of the year, not at the end. If the agent's expected commission for the year exceeds the threshold, deduct from the first payment. Take the rate from Part II of the First Schedule to the Finance Act for that year; the section supplies none. Check the deduction point: credit to the account of the payee or payment in cash, by cheque, draft or any other mode, whichever is earlier. Crediting a commission payable account triggers the section even if nothing is paid out. Confirm the payee is a resident. Section 194D does not reach a non-resident agent, for whom the analysis is under s.195. Keep s.194D, s.194DA and s.194G apart: this section is commission for soliciting or procuring insurance business, s.194DA is a payment under a life insurance policy to the policyholder, and s.194G is commission on the sale of lottery tickets.
Validity check could not be completed. The operative words of the section are stable across every vintage read this pass and are not in doubt. What is NOT established is the amending Act and commencement date for the current twenty thousand rupee threshold: the Year 2026 page carries no footnote list, and no 2024 or 2025 vintage page of s.194D was located, so the entry records the change as a difference between the Year 2023 and Year 2026 printed texts and attributes it to nothing. Nor is the reduction from twenty thousand to fifteen thousand, visible between the Year 2014 and Year 2020 pages, attributed to any Act. A practitioner acting on a threshold for a financial year between 2015-16 and 2025-26 must confirm it against the Finance Act for that year before advising. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The current text was transcribed this pass from https://incometaxindia.gov.in/w/section-194d, headed 'Income-tax Act, 1961' and 'Section 194D - Insurance commission', stamped Year: 2026, which prints twenty thousand rupees and carries NO footnote list at all — so the amending Act and commencement date for the increase from fifteen thousand to twenty thousand are NOT sourced anywhere in this entry, and I do not state them. What I can show is the movement, from year-stamped pages read this pass: /w/section-194d-46 (Year 2020) and /w/section-194d-50 (Year 2023) both print fifteen thousand rupees; /w/section-194d-10 (Year 2012) and /w/section-194d-42 (Year 2014) both print twenty thousand rupees, the Year 2014 page carrying footnote 92 and the Year 2012 page footnote 66, each reading 'Substituted for "five" by the Finance Act, 2010, w.e.f. 1-7-2010'; and /w/section-194d-2 (Year 2009), /w/section-194d-22 (Year 2008), /w/section-194d-14 (Year 1993), /w/section-194d-18 (Year 1995) and /w/section-194d-6 (Year 1990) all print five thousand rupees. I could NOT find any 194D page stamped 2016, 2017, 2024 or 2025, so the reduction from twenty thousand to fifteen thousand and the later restoration to twenty thousand are established as facts about the printed text at particular years and NOT attributed to any Act. A reader relying on either turning point must find the Finance Act. The parallel s.194G change from fifteen to twenty thousand IS attributed on that section's own live page to Act No. 7 of 2025 with effect from 1 April 2025, which makes the same date likely here, but likely is not established and this entry does not assert it. The second proviso's threshold on the pre-1987 pages does not exist at all — /w/section-194d-26 (Year 1981), /w/section-194d-30 (Year 1985) and /w/section-194d-34 (Year 1980) print only the first proviso, and the threshold proviso is footnoted on later pages as inserted by the Finance Act, 1987 with effect from 1 June 1987. A verification pass narrowed both undated turning points without closing either. https://incometaxindia.gov.in/w/section-194d-54 (Year: 2018) and https://incometaxindia.gov.in/w/section-194d-52 (Year: 2024 (No. 2)) both print fifteen thousand rupees and neither carries an amending footnote, so the reduction from twenty thousand to fifteen thousand falls between the Year 2014 and Year 2018 texts, and the restoration to twenty thousand between the Year 2024 (No. 2) and Year 2026 texts. Neither is attributed to any Act and neither date is asserted here. THE decided_on FIELD: it carries a commencement date and not a decision date — 1 July 2010, the Finance Act, 2010 substitution, which is the most recent amendment to s.194D that any page read dates. It is deliberately NOT the Year 2026 page stamp, because a page vintage is not a commencement date and the commencement of the current twenty thousand rupee threshold is not established anywhere in this entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
As printed on the Year 2026 departmental page: the duty is on any person paying a resident remuneration or reward for soliciting or procuring insurance business, including continuance, renewal or revival business; the deduction point is credit or payment, whichever is earlier; the rate is the rate in force under the Finance Act and is not stated in the section; and no deduction is made where the amount credited or paid, or likely to be credited or paid, during the financial year does not exceed twenty thousand rupees. The threshold read five thousand rupees on the pages up to Year 2009, twenty thousand rupees on the Year 2012 and Year 2014 pages after the Finance Act, 2010 substitution effective 1 July 2010, fifteen thousand rupees on the Year 2020 and Year 2023 pages, and twenty thousand rupees again on the Year 2026 page.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
The Tribunal recalled its whole order on my miscellaneous application. Will that recall survive?
You pay a foreign supplier for software. Is that royalty, and must you deduct TDS?
Must you deduct tax on every payment to a non-resident, just to be safe?
The remittance to my foreign parent bore no tax. Can s.40(a)(i) still hit me for non-deduction?