Income Tax Department Set to Issue Rs 25,000 Crore Tax Notices to Insurers Over Alleged Evasion

Last updated: 10 February 2024

The Income Tax Department is set to send demand notices totaling Rs 25,000 crore to several insurance companies by the end of March. According to a senior government official, this move comes as part of a reassessment of taxes paid by these companies for the period before April 1, 2023.

The dispute revolves around commissions paid to agents and intermediaries by insurance companies, which allegedly exceed the limits set by the Insurance Regulatory and Development Authority of India (IRDAI). The tax authorities suspect that these additional commissions were disguised as other expenses.


The Central Board of Direct Taxes (CBDT) is leading the investigation into potential tax evasion by insurance companies. While IRDAI lifted the capping limits on commissions from April 1, 2023, the income tax department argues that commissions claimed before this date were unjustified, as they were not supported by actual services provided.

According to the official, if these payments were not genuine expenses, they should not have been eligible for deductions, meaning the companies would be liable to pay taxes on a higher income. The CBDT plans to disallow these expenses, make tax adjustments, and may even pursue penalty proceedings.

An anonymous source familiar with the matter highlighted the alleged fraudulent accounting practices by insurance companies, emphasizing that income cannot be accounted for as an expense to claim deductions.

In a parallel investigation, the Directorate General of Goods and Services Tax Intelligence (DGGI) has issued notices to around 15 insurance companies, including major players like Bajaj Allianz, Aditya Birla Sun Life Insurance, and HDFC Life Insurance, for suspected Goods and Services Tax (GST) evasion totaling over Rs 2,350 crore in 2023.

HDFC Life, in particular, disclosed receiving a show-cause notice from the DGGI demanding Rs 942 crore in taxes for the period spanning from July 2017 to FY22.

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