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Insurance can go a long way when it comes to mitigating the financial crunch caused due to medical emergencies. Therefore, it is advisable to take an insurance policy not only for oneself but for one’s dependents as well. Most times people choose their insurance via agents, brokers, etc. In such cases, the insurance commission or any other remuneration/reward received by such agents, brokers etc., are subjected to Tax Deducted at Source (TDS) as dictated under Section 194D of the Income Tax Act.
Union Budget 2021 Outcome:
– New sections 206AB and 206CCA have been introduced. The taxpayers who have TDS / TCS more than Rs 50,000 in the last two years but have not filed income tax returns, the rate of TDS shall be double the specified rate or 5% whichever is higher.
– New section 194Q is introduced to levy TDS of 0.1% on a purchase transaction more than Rs. 50 lakh in a year. The responsibility of deduction shall lie only on the persons whose turnover exceeds Rs.10 crores.
The tax must be deducted by the entity who makes the payment to the resident person, as remuneration/ rewards, by the way of commission or for the following purposes:
Note that this provision applies from 1st June 1973 onwards.
The deduction of tax on insurance commission under Section 194D based on which of the following comes earlier:
Section 194D is applicable for all such payments made to a resident whether they are an individual, company or any other category of persons. The rate of TDS are mentioned below:
|Details||Rate of TDS|
|Persons other than a company||5%|
The TDS rate under section 194D was 3.75% for non-company deductees and 10% for domestic company deductees for payments from 14th May 2020 until 31st March 2021.
There are two instances when TDS is not deducted under Section 194D:
An individual who receives a commission can make an application in Form 13 to the Assessing Officer for a certificate authorising the payer not to deduct any tax or to deduct tax at a lower rate. In accordance with section 206AA(4), no certificate under Section 197 for non-deduction or a lower rate of deduction will be given unless the application also provides the PAN of the applicant.
The due date to collect and deposit tax deducted on commission paid to insurance agents is 7th of next month.
The deductee/ recipient will receive TDS certificates summarising the insurance commission payments and the TDS thereon. The due dates for receipt of TDS certificates are mentioned below:
|Months||Deadline for issuing the Certificate|
|April – June||15th August|
|July – September||15th November|
|October – December||15th February|
|January – March||15th June|
The due date for TDS returns for Q1 and Q2 of FY 2020-21 was extended to 31st March 2021. Accordingly, the due date to issue TDS certificates was 15th April 2021.