40A. Limitation of expenditure on commission.- (l) No person shall pay or contract to pay to an insurance agent, and no insurance agent shall receive or contract to receive by way of commission or remuneration in any form in respect of any policy of life insurance issued in India by an insurer after the 31st day of December, 1950, and effected through an insurance agent, an amount exceeding- (a) where the policy grants an immediate annuity or a deferred annuity in consideration of a single premium, or where only one premium is payable on the policy, two per cent of that premium, (b) where the policy grants a deferred annuity in consideration or more than one premium, seven and a half per cent of the first year's premium, and two per cent of each renewal premium payable on the policy, and (c) in any other case, thirty five per cent of the first year's premium, seven and a half per cent of the second and third year's renewal premium, and thereafter five per cent of each renewal premium payable on the policy: Provided that in a case referred to in clause (c), an insurer, during the first ten years of his business may pay to an insurance agent and an insurance agent may receive from such an insurer, forty per cent of the first year's premium payable on the policy: Provided further that in case referred to in clause (c) where the rate of commission payable on the first year’s premium is equal to or less than twenty-one per cent thereof, and the rate on the fourth and fifth year’s premiums does not exceed sis per cent thereof, the Life Insurance Corporation of India may pay to an insurance agent, and the insurance agent may receive from it, commission on the sixth and subsequent year’s renewal premiums payable on the policy at a rate not exceeding six per cent of each renewal premium. (2) No person shall pay or contract to pay to a special agent, and no special agent, shall receive or contract to receive, by way of commission or as remuneration in any form, in respect of any policy of life insurance issued in India by an insurer after the 31st day of December, 1950, and effected through a special agent, an amount exceeding— (a) in a case referred to in clause (a) of sub section (1), one half per cent of the premium, (b) in a case referred to in clause (b) of sub section (1), two per cent of the first year's premium payable on the policy and (c) in a case referred to in clause (c) of sub section (1), fifteen per cent of the first year's premium payable on the policy: Provided that in a case referred to in clause (c), an insurer, during the first ten years of his business, may pay to a special agent, and a special agent may receive from such an insurer, seventeen and a half per cent of the first year's premium payable on the policy: Provided further that in a case referred to in clause (c), where the rate of commission payable on the first year’s premium is equal to or less than twenty-one per cent thereof, and the rate on the fourth and fifty year’s premiums does not exceed six per cent thereof, the Life Insurance Corporation of India may pay to an insurance agent, and the insurance agent may receive from it, commission on the sixth and subsequent year’s renewal premiums payable on the policy at a rate not exceeding six per cent of each renewal premium. (3) No person shall pay or contract to pay to a special agent, and no special agent, shall receive or contract to receive, by way of commission or remuneration in any form in respect of any policy of general insurance issued in India by an insurer after the COMMENCEMENT OF Insurance (Amendment Act, 1968, and effected through an insurance agent, an amount not exceeding fifteen per cent of the premium payable on the policy where the policy relates to fire or marine insurance or miscellaneous insurance. (4) No person shall pay or contract to pay to a principal agent, and no principal agent shall receive or contract to receive, by way of commission or remuneration in any form, in respect of any policy of general insurance issued in India by an insurer after the commencement of the Insurance (Amendment) Act, l950, and effected through a principal agent, an amount exceeding (a) in the case referred to in clause (a) of sub section (3), twenty per cent of the premium payable on the policy, and (b) in the case referred to in clause (b) of that sub section, fifteen per cent of the policy, less any commission payable to any insurance agent in respect of the said policy: Provided that the Authority may, in such circumstances and to such extent and for such period as may be specified, authorise the payment of commission or remuneration exceeding the limits specified in this sub section to a principal agent of an insurer incorporated or domiciled elsewhere than in India, if such agent carries out and has continuously carried out in his own office duties on behalf of the insurer which would otherwise have been performed by the insurer. (5) Without prejudice to the provisions of section 102 in respect of a contravention of any of the provisions of the preceding sub sections by an insurer, any insurance agent who contravenes the provisions of sub section (1) or sub-section (3) shall be punishable with fine which may extend to one hundred rupees. | 
