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TDS from Insurance Commission [Section 194D]

1.   Who is required to make TDS from Insurance Commission:

The person responsible for paying to a resident, the income mentioned below.

Remuneration or reward whether by way of commission or otherwise—

(a)        for soliciting or procuring insurance business, or

(b)        for continuance, renewal or revival of policies of insurance.

2. When TDS to be deducted from Insurance Commission:

At the time of credit of commission income to the account of payee or the payment thereof in cash or by issue of a cheque or draft or by an y other mode, whichever is earlier.

3.   Rate of TDS for financial years 2019-20 and 2020-21 from Insurance Commission

Payee whose payment will suffer TDS

Rare of TDS

Resident person other than company

5%

Domestic company

10%

Notes:

1.       No surcharge or health and education cess shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.

2.         The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

Section 194D applies in relation to all such payments made to a resident whether individual,
company or any other category of person. These provisions do not restrict the deduction of tax at source to insurance commission paid only to individuals.

4.   Where No Tax is to be Deducted at Source from Insurance Commission:

(A)   When insurance commission paid or credited does not exceed Rs. 15,000:

No tax is to be deducted if the amount or the aggregate amounts of such income does not exceed Rs. 15,000 ( Rs. 20,000, up to 31.5.2016) in a financial year.

(B)   Where a Self-declaration under Form No. 15G / 15H is furnished by a particular person [Section 197A(1A), (1B) and (1C)]:

A person, other than a company or firm may furnish a declaration in writing in duplicate in new Form No. 15G to the payer to the effect that there is no tax payable on his Total Income. In this case, the payer shall not deduct any tax at source.

However, as per section 197A (1B), the assessee cannot furnish the declaration under this clause if the aggregate amount of the following incomes credited or paid or likely to be credited or paid during the previous year in which such income is to be included exceeds the maximum amount which is not chargeable to tax:

(1)          Payment from accumulated balance of recognized provident fund, if taxable.

(2)          Interest on securities.

(3)          Interest other than interest on securities.

(4)          Payment in respect of life insurance policy, if taxable.

(5)          Insurance commission

(6)          Payment in respect of deposit under National Saving Scheme.

(7)          Payment in respect of rent.

Notwithstanding anything contained in section 197A(1B), above, no deduction of tax shall be made from the above incomes in the case of an individual resident in India who is of the age of 60 year or more at any time during the previous year, if such individual furnishes to the payer, a declaration in writing in duplicate in Form No. I 5H to the effect that the tax on his estimated total income of the previous year in which the above income is to be included in computing has total income will be Nil.

In the case of such senior citizen, the income from the above sources can be more than the maximum amount which is not chargeable to tax but the tax on his estimated total income, inclusive of such incomes, should be nil.

As per section 206AA (2), declaration under Form No. 15G or 15H shall not be valid if it does not contain the permanent account number of the declarant. In case any declaration becomes invalid, the deductor shall deduct the tax @ 20% except where the payment is made from accumulated balance of recognised provident fund where it will be deducted at the maximum marginal rate.

The payer of the income is required to deliver to the Principal Commissioner or Commissioner one copy of declaration given under new Form 15G on or before the 7th day of month next following the month in which the declaration is furnished to him.

5.   Where the Tax is either Not be Deducted or to be Deducted at Lower Rate [Section 197 Rule 28 and 28AAJ

The assessee to whom insurance commission is payable may make an application in Form No. 13 for obtaining a certificate for deduction of tax at any lower rate or no deduction of tax, as the case may

An application by a person for grant of a certificate for the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, under section 197(1) shall be made in Form No. 13 electronically, —

(i)         under digital signature; or

(ii)        through electronic verification code.

Where such certificate is given, it will be valid for such period of the previous year as may be specified in the certificate and the person responsible for paying such commission, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rate specified in such certificate or deduct no tax, as the case may be.

The certificate for deduction of tax at any lower rates or no deduction of tax, as the case may be, shall be issued except in certain cases direct to the person responsible for deducting the tax under advice to the person who made an application for issue of such certificate

However, as per section 206AA(4), no certificate under section 197 shall be granted unless the application made in Form No. 13 under that section contains the Permanent Account Number of the applicant.

 

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