Section 194D deals with TDS deduction on insurance commission. Under this section, any person responsible for paying any income to a resident for soliciting or procuring insurance business (including business related to the continuance, renewal or revival of policies of insurance); by the way of remuneration or reward, whether by way of commission or otherwise; shall deduct TDS at 5%/20%, if the total amount credited/paid exceeds Rs. 15000 during the financial year. However, no deduction is to be made from any such income credited/paid before 1st June 1973.
Section 194D & 194DA of Income Tax Act
If PAN is furnished, TDS rate is 5%, and if PAN is not provided, TDS rate is 20% along with surcharges and education cess & SHEC. However, an assessee can also apply for no TDS or TDS at a lower rate in Form 13 to an assessing officer U/S 197. If the assessing officer is satisfied; then he will issue a certificate to an assessee for lower deduction of income tax.
A person shall deduct TDS;
– At the time of credit of such income to the account of payee OR
– At the time of payment thereof in cash or by issue of a cheque/draft or by any other mode,
whichever is earlier.
For reversal of commission which the agency pays to the agent, no adjustment is allowed to be made from the amount of TDS. TDS shall be deducted from the whole of the commission credited/paid without deducting the amount of reversal if any.
Details of TDS deducted U/ Section 194D is filed in Form 26Q which shall contain the details of commission credited/paid along with the sum of TDS deducted and deposited to the account of the central government.
If the government deducts TDS, it has to deposit on the same day. But if any non-government entity deducts the TDS, he has to deposited such TDS within 1 week from the end of the month; in which he deducts such TDS. In case he credit/pays the amount on 31st March, he has to deposit TDS within 2 months from the end of the FY in which he credit/pays.
However, an assessing officer may, on your application, allow TDS deduction on a quarterly basis, i.e., 15th July, 15th October, 15th January and 15th April.
Section 194DA of Income Tax Act
U/ Section 194DA of Income Tax Act, any person responsible for paying any sum to a resident under life insurance policy (including any sum allocated by way of bonus on such policy); other than the amount not includible in the total income in clause (10) of section 10; shall deduct income tax at 1%/20%, at the time of payment thereof; if the aggregate payout across all policies exceeds or equals to Rs. 1 lakh during the financial year.
If the PAN is furnished, TDS rate shall be 1% and if PAN not provided, TDS rate shall be 20%. If the person has made payment before 1st June 2016 TDS rate will be 2%.
As per section 10 (10D) of the income tax act, 1961; the amount of sum assured including any bonus paid on maturity or surrender of policy or on the death of the insured; is entirely tax-free for the receiver subject to certain conditions. Thus, the amount received on death is fully exempt; but the amount a person receives on other than death is exempt up to certain percentage as follows:
Policy issue date
Premium as a % of sum assured
From 1st April, 2003 to 31st March, 2012
After 31st March, 2012
10% (15% for disabled person)
Thus, the provisions of Section 194DA apply to those life insurance policy payments, which the section 10(10D) does not exempt.