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Section 194D – TDS on Insurance Commission

Insurances help in many ways, one of the common benefits of having insurance is that it helps in meeting medical emergency finance. Henceforth, it is important to not only cover yourself but also your family member with an insurance policy. Generally, most of the people take insurance through the third party such as agents, brokers and so forth. In such cases, Section 194D of the Income Tax Act applies, as per this section any commission received by the third party are subject to deduct the tax at source.

 

1. Eligibility criteria for TDS under Section 194D

Under Section 194D TDS shall be deducted by the entity who makes the remuneration or commission to the resident person:

Requesting and obtaining insurance business

Continuance, revival or renewal of insurance policies

2. At what time the TDS shall be deducted under Section 194D?

Under Section 194D TDS shall be deducted base on the following two cases:

  • Either at the time of crediting commission in the payee account, or
  • Paying the commission in either cash/cheque or kind. (Whichever is earlier)

3. What is the TDS rate under Section 194D?

Section 194D of Income Tax Act applies on all such payment of commission to the person irrespective whether they are individual or a company. Let us see the rate of TDS under Section 194D:

Particulars TDS Rate
If PAN details are furnished 5
In case when the PAN details are not furnished 20

The surcharge will not be applicable on these rates and henceforth, the TDS shall be deducted at the rates mentioned above.

4. Are there any scenarios when TDS shall not be deducted under 194D?

Under Section 194D, the TDS shall not be deducted in the following cases:

  • When the commission paid by an entity is not more than 15,000 INR, and
  • At the time when the assessee has provided self-declaration in Form 15G or Form 15H stating that no tax liability arises on his total income, subject to certain terms and conditions.

5. Lowered rate or Non-deduction of TDS

Under Section 197, any individual who is receiving commission can apply to the assessing officer to lower the rate of TDS or non-deduction of TDS in Form 13.

As per Sub-Section 4 of Section 206AA, no certificate shall be provided by the assessing officer for non-deduction or lowered rate of deduction until the applicant provides PAN with the application.

6. What is the due date for issuing TDS certificates under Section 194D?

All deductors shall make sure that all the deductee (except salary based) gets the TDS certificate within the time limit prescribed. Here is the due date for issuing TDS certificates:

In case of Non-Government Deductor

Periods Due Date of issuing TDS certificates
April to June 30th July
July to September 30th October
October to December 30th January
January to March 30th May

In the case of Government Deductor

Duration Deadline for issuing certificates
April to June 15th August
July to September 15th November
October to December 15th February
January to March 30th May