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TDS on Insurance Commission (Section 194D)

There are various provisions related to TDS in the Income Tax Act, 1961. One of the very important provisions related to TDS is TDS on TDS on insurance commission under section 194D. In this article we are going to discuss section 194D in to detail.

 Applicability of Provisions of section 194D:

The person who is responsible for making payment to a Resident Person in respect of the below mentioned expenses is required to deduct TDS:

• Payment by way of remuneration / reward, whether by way of commission or otherwise;
• For Soliciting / Procuring Insurance Business; or
• For the continuance, renewal, or revival of an insurance policy.

Note: Thus, provisions of section 194D applies only to the payment made to a resident person. Payment made to a non-resident person is not covered under section 194D, the same is governed by section 195.

Rate of TDS on Insurance Commission:

If the provisions of section 194D of the Income Tax Act, 1961 is applicable, the Deductor is required to deduct TDS at the following rates:

Note: No surcharge, education cess or SHE cess shall be added to the above rates. However, if the PAN is not furnished, the Deductor is required to deduct TDS @ 20% i.e., maximum marginal rate.

Time of Deduction of TDS on Insurance Commission:

The Deductor who is liable to deduct TDS under provisions of section 194D of the Income Tax Act, 1961 is required to deduct TDS within earlier of the following dates.

• At the time of credit of income to the account of the payee;

OR

• At the time of payment in cash, cheque, draft, or by any other mode.

Cases when TDS is not to be deducted under section 194D:

Under the following cases, the TDS is not to be deducted:

• The aggregate amount of income credited / paid during the financial year to the payee’s account doesn’t exceed INR 15,000.
• The payee has furnished self-declaration under Form 15G / Form 15H.