Section194D TDS on Insurance commission

As per section 194D: Any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.

Provided that no deduction shall be made under this section from any such income credited or paid before the 1st day of June, 1973:

Provided further that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed fifteen thousand rupees.

Summary of Section 194D of the Income Tax Act

• Deductor/ Payer: Any person
• Deductee/ Payee: Resident person
• Nature of Payment: Income by way of remuneration or reward, whether by way of commission or otherwise,
  • for soliciting or procuring insurance business
  • for continuance, renewal or revival of an insurance policy
• Threshold Limit: Exceeding Rs. 15,000/-
• Rate of TDS:
  • If payment made to Individual or HUF: 5%
  • If payment made to other than Individual or HUF: 10%
  • However, in case the PAN is not furnished, then Deductor would be liable to deduct TDS @ 20% i.e. at the maximum marginal rate.
  • No surcharge, education cess or SHE cess shall be added to the above rates
• Time of deduction:

Deductor is required to deduct TDS within earlier of the following dates:

• • At the time of credit of such income to the account of the payee or
  • At the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode

• No TDS is required to be deducted:
  • If aggregate of the amounts of commission credited or paid or likely to be credited or paid during the financial year does not exceed Rs. 15,000/-.
  • The payee has furnished self-declaration under Form 15G/Form 15H
• Point to be Noted:
  • Section 194D is applicable only in case of payment made to resident person.
  • Section 194D is not applicable in case of payment made to non-resident person. If payment made to non-resident person then section 195 is applicable.