TDS on Insurance Commission

The purpose of the present article is to provide an overview of Section 194D. The section deals with TDS on insurance commission.

Person Responsible for Deducting Tax

Deduction of tax must be performed by a person who is responsible to make payments to a resident, in terms of remuneration or reward, whether by way of commission or otherwise, for the following purposes:

For soliciting or procuring insurance business.
For continuance, renewal or revival of policies of insurance.

TDS Rates

The following are the 1 on insurance commission payments:

Resident other than companies - 5%.
Domestic company - 10%.

A surcharge, education cess or SHEC shall not be added to the above rates. Hence, TDS will be deducted at source at the base rate. Moreover, if PAN is not quoted, the rate of TDS will be 20% in all cases.

Time Limit

If the deduction is by, or on behalf of the Government, then TDS must be deposited on the same day of deduction. Otherwise, TDS must be deposited within one week within the end of the month in which such deduction was made. If the deduction is made on March 31st, which is the end of the financial year, TDS has to be deposited within two months of the end of the financial year in which it is credited or paid. The assessing officer may also choose to process the deductions on a quarterly basis.

Issue of TDS Certificate and Time-Limit

All deductors must ensure the proper and timely issue of certificates, except for that of salaries. The certificate must be issued within the following dates:

Non-Government Deductor

The deadline for issuing certificates for the months of April-June would be the 30th of July.
The deadline for issuing certificates for the months of July-September would be the 30th of October.
The deadline for issuing certificates for the months of October-December would be the 30th of January.
The deadline for issuing certificates for the months of January-March would be the 30th of May.

Government Deductor

The deadline for issuing certificates for the months of April-June would be the 15th Of August.
The deadline for issuing certificates for the months of July-September would be the 15th of November.
The deadline for issuing certificates for the months of October-December would be the 15th of February.
The deadline for issuing certificates for the months of January-March would be the 30th of May.

Where no Tax is Deducted at Source

Income Tax Deduction is not pursued with respect to the following provisions:

Insurance commission paid or credited, not exceeding Rs 15,000.
A person other than a company or firm may furnish a declaration in writing in Form No. 15G/15H to the payer stating that there is no tax payable on his/her total income, subject to conditions.

TDS at Lower Rate

Any person to whom interest payments are dispersible shall prepare an application in Form No. 13. The purpose of the form is for requesting that tax deduction may be done at a lower rate or tax is not deducted. Post submission of the same to the Assessment Officer, a certificate must be obtained denoting its approval. This is possible only if the submitted application contains the Permanent Account Number of the applicant.

A Brief Note on Section 194DA

Any person responsible for paying to a resident any sum under a life insurance policy, including the sum allocated by way of bonus on such policy, other than the amount not included in the total income under clause 10D of Section 10, shall deduct tax at the rate of 2%. Deductions under this section shall not be made where the amount of such payment or its aggregate during the financial year is less than a thousand rupees.
Any amount received by the legal heirs in the event of a death is fully exempt under Section 194DA.

Cases where TDS under Section 194DA is not Exempt

If the insurance premium is greater than 10% or 15% or 20%.
Any sum received under Section 80DD(3) or Section 80DDA(3).
Any sum received under a Keyman insurance policy.
Any sum received under an insurance policy issued on or after the 1st of April, 2003, but on or after the 1st of April 2012, where the premium payable for any of the years during the term of the policy exceeds 10% of the capital sum assured.

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Frequently Asked Questions

Common questions about TDS on Insurance Commission.

Section 194D of the Income Tax Act deals with the Tax Deducted at Source (TDS) on insurance commission payments made to residents for soliciting or procuring insurance business, or for the continuance, renewal, or revival of insurance policies.

The person responsible for deducting TDS on insurance commission payments is the one who is making payments to a resident, whether by way of commission or otherwise, for soliciting or procuring insurance business, or for the continuance, renewal, or revival of insurance policies.

The TDS rates on insurance commission payments are: 5% for resident individuals or entities other than companies, and 10% for domestic companies. Additionally, if the recipient's PAN is not quoted, the TDS rate will be 20% in all cases.

If the deduction is made by or on behalf of the government, the TDS must be deposited on the same day of deduction. Otherwise, it must be deposited within one week of the end of the month in which the deduction was made.

The time limit for issuing TDS certificates varies depending on the deductor and the quarter. For non-government deductors, the deadline ranges from July 30 to May 30, depending on the quarter. For government deductors, the deadline ranges from August 15 to May 30.

Yes, TDS is not deducted on insurance commission payments not exceeding Rs 15,000. Additionally, a person other than a company or firm can furnish Form 15G/15H to the payer stating that there is no tax payable on their total income, subject to certain conditions.

Yes, a person to whom insurance commission payments are dispersible can request for TDS to be deducted at a lower rate by submitting Form No. 13 to the Assessment Officer and obtaining a certificate of approval.

Section 194DA of the Income Tax Act deals with TDS on payments made to residents under a life insurance policy, including bonuses, except for amounts not included in the total income under Section 10(10D). The TDS rate is 2%, subject to certain conditions.

TDS under Section 194DA is not exempt in cases where the insurance premium exceeds certain limits (10%, 15%, or 20% of the capital sum assured), sums received under Sections 80DD(3) or 80DDA(3), sums received under a Keyman insurance policy, or sums received under certain insurance policies issued after April 1, 2012.

If the insurance premium is greater than 10%, 15%, or 20% (depending on the policy issuance date) of the capital sum assured, any sum received under the policy will be subject to TDS under Section 194DA, even if it would otherwise be exempt.