TDS On Insurance Commission

When it comes to minimizing the financial impact of medical emergencies, insurance may go a long way. As a result, it is prudent to obtain insurance not just for oneself but also for one’s dependents. The majority of the time, people choose their insurance through agents, brokers, and other intermediaries. In such situations, the insurance commission or any other remuneration/reward earned by such agents, brokers, and so on is liable to Tax Deducted at Source (TDS), as prescribed by Section 194D of the Income Tax Act.

Updates To The Union Budget 2022

TDS On Insurance Commission
  • New Section 194S- A person is subject to a 1% Tax Deduction at Source (TDS) at the time of payment for the transfer of virtual digital assets.
  • It is suggested to change the amount on which TDS should be deducted when selling immovable property under Section 194-IA. 
  • The individual purchasing the property should subtract 1% tax on the amount paid/credited or the stamp duty value of the property, whichever is greater.
  • TDS at 10% should be deducted by any person who provides perks or benefits, whether convertible into money or not, to any resident in exchange for such resident carrying on any business or profession.

Eligibility Of Deduction Under Section 194D

The tax must be deducted by the entity that makes the payment to the resident person, whether as remuneration/rewards, commission, or for the following purposes:

  • Obtaining or soliciting insurance business
  • Insurance policies are continued, renewed, or revived.
  • It should be noted that this provision is effective as of June 1, 1973.

When Is TDS Under Section 194D Get Deducted?

The deduction for insurance commission tax under Section 194D is determined by which of the following occurs first:

  • Tax is deducted when commission is credited to the payee’s account, or
  • The payment is made in cash, check, or kind.

What Is The TDS Rate Under Section 194D?

Section 194D applies to all such payments made to a resident, whether they are individuals, corporations, or any other type of person. The following is the TDS rate:

DetailsRate of TDS
Individuals who are not employees of a corporation5%
Domestic Corporation10%

For payments from May 14, 2020, to March 31, 2021, the TDS rate under Section 194D was 3.75 percent for non-company deductees and 10 percent for domestic company deductees.

  • These charges will not be subject to a surcharge or SHEC. As a result, the tax will be deducted at the source at the above-mentioned basic rates.
  • In circumstances where the deductee has not quoted PAN, the TDS rate shall be 20%.
TDS On Insurance Commission

When Is TDS Not Required To Be Deducted Under Section 194D?

TDS is not deducted in two situations under Section 194D:

  • The amount of commission paid does not exceed Rs.15,000
  • Form 15G/ 15H Self-declaration

Non-Deduction Or A Low Tax Deduction Rate

An individual who gets a commission may apply to the Assessing Officer in Form 13 for a certificate authorizing the payer not to deduct any tax or to deduct tax at a reduced rate. According to Section 206AA(4), no certificate under Section 197 for non-deduction or a lesser rate of deduction will be issued unless the application includes the applicant’s PAN.

Date By Which TDS Must Be Deposited Under Section 194D

The deadline for collecting and depositing tax deducted from insurance agency commissions is the 7th of the following month.

TDS Certificate Issuance Deadlines

TDS certificates summarise insurance commission payments and TDS will be issued to the deductee/recipient. The following are the deadlines for receiving TDS certificates:

Months

Deadline for issuing the Certificate
April – June 15th August
July – September 15th November
October – December15th February
January – March15th June