1774. Instructions for deduction of tax at source from insurance commisssion during financial year 1986-87 at the rates specified in Part II of First Schedule to Finance Act, 1986
1. I am directed to invite a reference to this Department’s Circular No. 426 [F. No. 275/32/85-IT(B)], dated 24-7-1985 wherein the rates at which the deduction of income-tax was to be made during the financial year 1985-86 from payments of income by way of insurance commission under section 194D were intimated. The Finance Act, 1986 prescribes in Part II of the First Schedule the following rates for deduction of tax at source under section 194D during the financial year 1986-87:
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Income-tax
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I.
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In the case of a person (other than a company) who is resident in India
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10 per cent;
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II.
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In the case of a domestic company
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21.5 per cent;
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2. Though the provisions of section 194D apply only in relation to income by way of insurance commission paid to a resident under the provisions of section 195, income-tax is required to be deducted from payments (including payment of income by way of insurance commission) made to a non-corporate non-resident taxpayer as also a company which is neither an Indian company nor a company which has made the prescribed arrangements for declaration and payments within India of dividends in the manner prescribed under rule 27 of the Income-tax Rules, 1962. In the case of a person other than a company, who is not a resident in India the rate of deduction of tax at source as specified in rule 1(b)( i) of Part II of the First Schedule to the Finance Act, 1986 is income-tax at 30 per cent of the income by way of insurance commission or income-tax in respect of the income at the rates prescribed in Sub-Paragraph I of Paragraph A of Part III of the said Schedule (Extract given in Annex), if such income had been the total income of such person, whichever is higher. In the case of a company which is not a domestic company tax on insurance commission is to be deducted at the rate of 65 per cent. There is no change in the substance of the main provisions in law insofar as they relate to deduction of income-tax from insurance commission, as given in paragraph 3 of the aforesaid circular.
Circular: No. 462 [F. No. 275/67/86-IT(B)], dated 10-7-1986.
ANNEX – EXTRACT FROM SUB-PARAGRAPH I OF PARAGRAPH A OF PART III OF
THE FIRST SCHEDULE TO FINANCE ACT, 1986
Paragraph A
Sub-Paragraph I
In the case of every individual or Hindu undivided family or unregistered firm or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii ) of clause (31) of section 2 of the Income-tax Act, not being a case to which Sub-Paragraph II of this Paragraph or any other Paragraph of this Part applies:—
Rates of income-tax
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(1)
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where the total income does not exceed Rs. 18,000
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Nil;
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(2)
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where the total income exceeds Rs. 18,000 but does not exceed Rs. 25,000
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25 per cent of the amount by which the total income exceeds Rs. 18,000;
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(3)
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where the total income exceeds Rs. 25,000 but does not exceed Rs. 50,000
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Rs. 1,750 plus 30 per cent of the amount by which the total income exceeds Rs. 25,000;
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(4)
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where the total income exceeds Rs. 50,000 but does not exceed Rs. 1,00,000
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Rs. 9,250 plus 40 per cent of the amount by which the total income exceeds Rs. 50,000;
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(5)
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where the total income exceeds Rs. 1,00,000
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Rs. 29,250 plus 50 per cent of the amount by which the total income exceeds Rs. 1,00,000.
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