TDS under Section 194D is to be deducted in case any person who pays to resident an income in form of remuneration/reward for generating insurance business.
When you buy an insurance policy through an agent, he receives commission, remuneration or reward. Such commission, remuneration or reward attracts TDS under Section 194D of the Income Tax Act
Cases where TDS is deducted under Section 194D
The cases where TDS is deducted under Section 194D, as stated above is on the payment to resident person in form of remuneration/rewards by way of:
– Commission
– Soliciting or obtaining insurance business
– Continuance, renewal or revival of policies of insurance
Also Read: Section 80D: Deductions on Medical & Health Insurance
Instances where TDS is not deducted under Section 194D
There are two instances, where TDS is not liable to be deducted under Section 194D:
– Commission paid does not exceed Rs. 15,000
– Self declaration under Form 15G/15H
When is TDS deducted under Section 194D?
The TDS on Insurance Commission under Section 194D is deducted on the following events, whichever is earlier:
– At the time of credit of commission in the account of the payee, or
– At the time payment is made in cash or cheque or kind.
Rate of TDS under Section 194D
| Particulars | PAN is furnished | PAN is not furnished |
|---|---|---|
| Persons other than a company | 5% | 20% |
| Domestic company | 10% | 20% |
Note:
– As per the Budget 2024 – rate for resident taxpayers is reduced to 2% with effect from 1st April 2025)
– Surcharge or Secondary and Higher Education Cess is not to be added in the above TDS rates.
Non-deduction of TDS or lower rate of tax deduction
An individual who receives a commission can make an application in Form 13 to the Assessing Officer for a certificate authorizing the payer not to deduct tax or to deduct tax at a lower rate.
Having said that, under section 206AA(4), no certificate under Section 197 for non-deduction or lowered rate of deduction will not be given unless the application also provides the PAN of the applicant.
Time limit to deposit TDS under Section 194D
The due date to collect and deposit tax deducted on commission paid to insurance agents is 7th of next month.
Due dates for issuing TDS Certificates
After the TDS has been deposited by the person responsible for deducting TDS, the payee/recipient will get TDS Certificate. This certificate summarizes the insurance commission, reward or remuneration payments as well as TDS thereon. Further, the due dates for issuing TDS Certificates are as follows:
| Quarter | Quarter Period | Deadline for issuing the Certificate |
|---|---|---|
| Q1 | April – June | 15th August |
| Q2 | July – September | 15th November |
| Q3 | October – December | 15th February |
| Q4 | January – March | 15th June |
Also Read: Know Types of TDS Certificates
Due date for filing TDS Returns
| Quarter | Quarter Period | Last date of filing |
|---|---|---|
| Q1 | 1st April – 30th June | 31st July |
| Q2 | 1st July – 30th September | 31st October |
| Q3 | 1st October – 31st December | 31st January |
| Q4 | 1st January – 31st March | 31st May |
Consequences of Non-Compliances
Levy of Interest: If the person responsible for deducting TDS, does not deduct the TDS on insurance commission or deducts the TDS but does not deposit to the government, then interest @1.5% is required to be paid on such amount.
Disallowance of expenses: Also, such person is not eligible to claim the deduction of expense from Profit and Gains from Business & Profession income, if TDS is not deducted on time.
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