In this guide
Insurance agents commonly receive commission from insurance companies after deduction of TDS. To claim the correct TDS credit or refund, the agent must report the insurance commission under the proper head of income and select the correct Income Tax Return form.
Before filing the return, the insurance commission reported in AIS should be matched with Form 26AS and the commission statement issued by the insurance company. A mismatch in income or TDS can delay the refund or result in an Income Tax compliance query.
For professional assistance, visit TaxClear ITR Filing Services:
How Is Insurance Commission Taxed?
Insurance commission received by an independent insurance agent is generally taxable under the head Profits and Gains of Business or Profession.
It should not normally be reported under Income from Other Sources merely because AIS describes the transaction as insurance commission. The nature of the activity is important: an insurance agent solicits, procures, renews or revives insurance business and earns commission for carrying on that agency activity.
The Income Tax Department also explains that remuneration received by an independent agent with discretion over the performance of work is taxable as business or professional income.
| Particulars | Correct treatment |
|---|---|
| Insurance commission received | Business gross receipts |
| TDS deducted by insurance company | TDS credit under Section 194D |
| Savings account or FD interest | Income from Other Sources |
| Genuine agency expenses | Deductible business expenses, subject to conditions |
| Correct ITR form | Generally ITR-3 |
Which ITR Form Should an Insurance Agent File?
An insurance agent earning regular commission income will generally have to file ITR-3 because the income is taxable under the head Profits and Gains of Business or Profession.
Why ITR-1 Is Not Appropriate
ITR-1 is meant for eligible individuals having specified income such as salary, house property and permitted income from other sources. It does not cover regular business income earned from an insurance agency.
Reporting insurance commission as “Any Other Income” in ITR-1 merely to claim a refund may lead to incorrect classification of income.
Why ITR-4 Is Generally Not Available
ITR-4 applies where eligible business or professional income is computed under the presumptive taxation provisions of Sections 44AD, 44ADA or 44AE. However, Section 44AD specifically excludes:
- A person earning commission or brokerage; and
- A person carrying on an agency business.
An insurance agent falls within these excluded categories. Therefore, the agent cannot simply declare 6% or 8% presumptive profit under Section 44AD and file ITR-4.
| ITR form | Applicability to insurance commission |
|---|---|
| ITR-1 | Not applicable to regular business commission income |
| ITR-2 | Not applicable where business or professional income exists |
| ITR-3 | Generally applicable |
| ITR-4 | Generally not available because commission and agency businesses are excluded from Section 44AD |
2026 TDS Rules for Insurance Commission
For Financial Year 2025-26, relevant to AY 2026-27, TDS on insurance commission is governed by Section 194D.
The applicable compliance position is:
- TDS rate: 2%;
- TDS threshold: ₹20,000 during the financial year; and
- TDS certificate: Form 16A.
The TDS rate was reduced to 2% with effect from 1 October 2024. The threshold for deduction was subsequently increased from ₹15,000 to ₹20,000 with effect from 1 April 2025. Therefore, the ₹20,000 threshold applies for FY 2025-26.
TDS is only an advance tax credit. It does not represent the final tax liability of the insurance agent.
Check AIS and Form 26AS Before Filing
After logging in to the Income Tax e-Filing portal, review the Annual Information Statement and Taxpayer Information Summary.
AIS may contain:
- Insurance commission;
- Savings bank interest;
- Fixed-deposit interest;
- Dividend income; and
- Other reported financial information.
Form 26AS should be checked separately to confirm:
- Name and TAN of the insurance company;
- Gross commission reported;
- TDS deducted;
- Financial year; and
- TDS deposited against the correct PAN.
Every insurance company entry should be matched with the relevant commission statement. If commission is received from multiple insurers, all entries must be reported.
Step-by-Step ITR Filing Process for Insurance Agents
1. Start a New ITR Filing
Log in to the e-Filing portal and select:
e-File → Income Tax Returns → File Income Tax Return
Select Assessment Year 2026-27, online filing mode and taxpayer category as Individual.
2. Select ITR-3
Choose ITR-3 because the return includes income from business or profession.
ITR-3 can also accommodate other applicable income, including:
- Salary or pension;
- House-property income;
- Capital gains;
- Bank interest; and
- Dividend income.
The Income Tax Department identifies ITR-3 as the applicable return for individuals and HUFs having business or professional income who are not eligible for ITR-1, ITR-2 or ITR-4.
3. Confirm the Tax Regime
The new tax regime is the default regime.
Since an insurance agent has business income, Form 10-IEA must be filed within the due date under Section 139(1) to opt for the old tax regime. The option should not be changed casually because business taxpayers do not have unrestricted annual switching between regimes.
For tax-regime analysis, visit:
4. Report Commission and Expenses
Enter the total insurance commission as business gross receipts. Then report only genuine expenses incurred wholly and exclusively for carrying on the insurance agency business.
Expenses should be supported by proper bills, payment records and business justification. Personal expenses should not be claimed as business deductions.
Where proper accounts are required, visit TaxClear Accounting Services:
5. Report Other Income
Savings account interest, FD interest, salary, rental income and other applicable amounts should be reported under their respective heads.
The figures should be reconciled with AIS, Form 16, bank statements and other supporting records.
6. Claim TDS Credit
Open the Taxes Paid schedule and match every TDS entry with Form 26AS.
Confirm:
- Gross commission amount;
- TDS amount;
- Deductor details; and
- Financial year 2025-26.
Do not claim TDS that is not reflected against the taxpayer’s PAN unless the mismatch is first corrected.
Can an Insurance Agent Claim a Full TDS Refund?
A full refund is not automatic merely because TDS was deducted.
The final refund is calculated as:
TDS and taxes paid minus final income-tax liability
For AY 2026-27, a resident individual under the new tax regime may be eligible for a rebate under Section 87A where the prescribed conditions are satisfied and total income does not exceed ₹12 lakh. However, the refund must still be calculated after considering total income, allowable expenses, applicable tax rates and other income.
Where an incorrect refund claim, TDS mismatch or notice arises, visit:
Frequently Asked Questions
Which ITR should an insurance agent file?
An insurance agent earning regular commission income should generally file ITR-3.
Can insurance commission be shown under Other Sources?
Regular insurance agency commission should generally be reported as business income, not Income from Other Sources.
Can an insurance agent file ITR-4 under Section 44AD?
Generally, no. Section 44AD excludes commission income and agency businesses.
What is the TDS rate on insurance commission for FY 2025-26?
The applicable TDS rate under Section 194D is 2%.
What is the TDS threshold for insurance commission?
For FY 2025-26, TDS is generally applicable where annual insurance commission exceeds ₹20,000.
Is the entire TDS amount always refundable?
No. The refund depends on the final tax liability after reporting all income and claiming only eligible expenses and deductions.
