The present article covers the provisions of TDS applicability on insurance commission contained under section 194D of the Income Tax Act, 1961.

Provisions of section 194D of the Income Tax Act, 1961

As per provisions of section 194D, the person who is responsible for making payment to a resident person for the below mentioned income is required to deduct TDS –

Income 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.

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 –

Particulars Rate of TDS
Domestic Company 10%
A Resident person other than a domestic company 5%

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 of the Income Tax Act, 1961 –

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.

Frequently Asked Questions (FAQ) on TDS Provision under Section 194D

Q.1 What is section 194D?

Ans: Section 194D covers the provisions relating to deduction of TDS on insurance commission. As per section 194D, any person making payment to a resident as the insurance commission or any other remuneration / reward is required to deduct TDS.

Q.2 What percentage of TDS is deducted?

Ans: If provisions of section 194D get attracted, the Deductor is required to deduct TDS @ 10% in case of Domestic company and @ 5% in any other case.

Q.3 What if TDS is not deducted?

Ans: The Deductor liable to deduct TDS as per provisions of section 194D fails to deduct the same, then, in such case the Deductor is liable to pay interest @ 1% per month from the date on which tax was deductible till the date TDS actually deducted.

Also Read-

Particulars
TCS – Tax Collection at Source – A Complete Guide
TDS Rate Chart for Financial Year 2019-2020
Section 192 – TDS on Salary
Section 192A – TDS on Premature withdrawal from EPF
Section 193: TDS on Interest on Securities
Section 194 – TDS on dividend
Section 194A: TDS on interest other than interest on securities
Section 194B and Section 194BB – TDS
Section 194C – TDS on Contractors
Section 194DA – TDS in respect of Life Insurance Policy
Section 194E – TDS on payment to Non-resident Sportsmen or Sports Association
TDS under Section 194EE and Section 194F
Section 194G TDS on Commission on Sale of Lottery Tickets
Section 194H – TDS on Commission or Brokerage
Section 194I of Income Tax Act, 1961 – TDS on Rent
Section 194IA TDS on transfer of immovable property
Section 194IB – TDS on Rent paid by Individual / HUF
Section 194LA: Payment of Compensation on acquisition of certain immovable property
TDS under Section 194LB, 194LBA, 194LBB and 194LBC
Section 194LC: TDS on income by way of interest from an Indian Company or a business trust
Section 194LD TDS on income by way of interest on certain bonds and Government Securities
Section 194J TDS on Fees for Professional or Technical Services
Section 194N – TDS on Cash Withdrawals
Section 194M: TDS on Payment of certain sum by certain Individual / HUF
Section 195 TDS on payment of any other sum to a non-resident

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