Section 194D: TDS On Payment Of Commission By Insurance Companies

We know that insurance is become an essential part of our healthy and safety lives. You have to ensure yourselves in this uncertain world by choosing appropriate insurance cover for yourself and your family. We are going through COVID-19 pandemic,which is teaching us the importance of insurance cover. An insurance will provide you financial stability against insured perils. You need not to expend your hard earned wealth on your medical expenses of on other types of perils, your insurance policy and insurer will take care of losses you have incurred in adversities. So it is advisable for everyone to take some degree of insurance cover for your and your families. In case of unforeseen events even future of your children for whom your reworking will jeopardises due to lack of insurance.

There are a number of insurers in the market and you can opt online or offline and take insurance policy. Offline policies generally available through insurance agents /insurance intermediaries appointed by insurance companies to solicited or sale their products. These insurance companies pay remuneration to these insurance agents / intermediaries by way of commission or brokerage.

It is duty of an insurance company or any person paying commission to insurance agent/intermediary to deduct TDS from the amount paid or credited.

Section 194 D of Income Tax Act, 1961 deals with TDS on insurance commission and provides that a person responsible for paying to a resident by income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business including business relating to continuance, renewal or revival of policies of insurance or required to deduct income tax thereon at the rates specified.

TAX RATES

PLEASE NOTE THAT:  if recipient of insurance commission paid does not have PAN or is unable to furnish PAN to insurance company or person liable to pay commission, then TDS will be deducted @20% for the amount paid or credited.

TIME OF DEDUCTION

Tax shall be deducted at the time of credit of such income to the account of payee or the payment thereof( by whatever mode), whichever is easier.

CBDT CIRCULAR NO. 277, dated July 21, 1980

Provides that at the time of deduction of tax from the insurance commission credited to agent’s account, adjustment for any debits made in this account is respect of excess commission credited or paid to him earlier is not permissible and income tax must be deducted from the full amount of commission credited to this account.

UNDER BELOW MENTIONED CONDITIONS TDS IS NOT DEDUCTIBLE

There are two instances when TDS is not deducted under Section 194D:

• Commission paid does not exceed Rs.15,000
• Self-declaration under Form 15G/ 15H

PLEASE NOTE THAT

1. Tax will not be deducted or will be deducted at lower rate than specified in case recipient applied to the Income Tax Authorities and get Lower TDS Certificate under Section 197 of the Income Tax Act, 1961;
2. Due date of collection and deposit of TDS will be 7^th day of the month;
3. The recipient of commission in whose account TDS has been deducted will get TDS Certificate Quarterly on 15^th August, 15^th  November, 15^th February  and 15^th June.

DISCLAIMER: the article produce here is only for knowledge and information to the readers. It is advisable to take professional advise before acting on any part of this article.