Insurance agent commission in India: the rules, the tax and a calculator
Since April 2023 each insurer sets its own commission rates under a board-approved policy, so the fixed rate tables many agents still quote are out of date. Here is how commission works now, how it is taxed, and a calculator for your own first-year and renewal rates.
Insurance agent commission is a percentage of the premium, usually higher in the first year and lower on renewals. IRDAI removed product-wise caps from 1 April 2023, so the rate depends on your insurer’s board-approved commission policy for that product.
TDS is 2% for individual agents once commission from an insurer crosses ₹20,000 in a year. GST on agent commission is paid by the insurer under reverse charge.
Insurance commission calculator
Enter the annual premium, how many years premiums are paid, and the first-year and renewal rates from your insurer’s commission structure. The table shows commission year by year, assuming the policy renews every year.
The rates filled in are an example only. Replace them with the first-year and renewal rates in your insurer’s commission structure for the product.
| Year | Premium | Rate | Commission | TDS at 2%* |
|---|---|---|---|---|
| 1 | ₹50,000 | 20% | ₹10,000 | – |
| 2 | ₹50,000 | 5% | ₹2,500 | – |
| 3 | ₹50,000 | 5% | ₹2,500 | – |
| 4 | ₹50,000 | 5% | ₹2,500 | – |
| 5 | ₹50,000 | 5% | ₹2,500 | – |
| 6 | ₹50,000 | 5% | ₹2,500 | – |
| 7 | ₹50,000 | 5% | ₹2,500 | – |
| 8 | ₹50,000 | 5% | ₹2,500 | – |
| 9 | ₹50,000 | 5% | ₹2,500 | – |
| 10 | ₹50,000 | 5% | ₹2,500 | – |
*TDS applies once your total commission from an insurer crosses ₹20,000 in a financial year, so it depends on your whole book with that insurer. This table shows it only for years where this one policy crosses the threshold on its own. Total TDS shown: ₹0.
How insurance commission works after April 2023
The IRDAI (Payment of Commission) Regulations, 2023 came into force on 1 April 2023 and repealed the 2016 regulations that set product-wise commission limits. Three rules replaced them.
- A board-approved policy. Every insurer must have a written commission policy approved by its board and reviewed periodically. It has to weigh the interest of policyholders, insurance penetration, the nature and tenure of the policy, and the interest of agents and intermediaries.
- An overall ceiling. Total commission paid by an insurer has to stay within the expenses of management limits in IRDAI’s separate regulations for life insurers and for general and health insurers.
- Annual returns. Insurers file board-approved returns on commission paid within 45 days of each financial year end.
In practice, two insurers can pay different rates on similar products, and an insurer can change its rates whenever it reviews its policy. Commission charts you find online usually show one insurer’s rates at the time they were published, so they may not match what your insurer pays today. Use the rates from your own insurer in the calculator above.
First-year and renewal commission
Commission structures usually separate the first-year premium from renewal premiums. The first-year rate rewards the work of selling the policy, and the renewal rate pays for keeping it in force, so a renewal only earns commission if the policyholder actually pays the premium.
That makes persistency the lever most agents underrate. A book where premiums lapse in year two earns the first-year commission and little else, while a book that renews earns every year of the premium paying term. In the calculator, set the premium paying years to see how much of the total comes from renewals.
TDS and GST on insurance commission
TDS. Insurers deduct tax at 2% from commission paid to individual and HUF agents, and at 10% for domestic companies, once total commission in the financial year crosses ₹20,000. The 2% rate and the ₹20,000 threshold apply from 1 April 2025. From 1 April 2026 the deduction sits under Section 393(1) of the Income-tax Act, 2025, which replaced Section 194D, and it shows in your tax credit statement for claiming against your income tax.
GST. Under notification 13/2017-Central Tax (Rate), GST on services an insurance agent supplies to an insurer is paid by the insurer under reverse charge. The agent does not add GST to the commission invoice.
Renewal dates, lapsed policies and commission statements from different insurers rarely sit in one place. We build custom platforms for distribution firms, and one can be built to track policies, renewals and commission alongside your clients’ mutual funds.
Adding mutual funds to an insurance practice
Selling mutual funds needs a separate qualification: the NISM Series V-A certification, or Series V-D which also covers Specialised Investment Funds, and an ARN from AMFI. The commission model differs too. Mutual fund distributors earn mostly trail commission, a yearly percentage of the client’s invested value, which grows with the book rather than with new sales.
Our guide to mutual fund distributor commission explains how trail is calculated and paid, and the trail commission calculator projects it year by year.