TDS under section 194D – Insurance Commission

Section 194D deals with TDS on insurance commission. It’s applicable to any person responsible for paying any income to a resident 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.TDS under section 194D – Insurance Commission

Such person shall deduct Tax at source at the rate of 10% in excess of Rs. 20, 000 paid or credited during the financial year.

Government of India in budget 2016-17 proposed to change this limit of Rs 20,000 to Rs 15,000 with effect from 1st day of June, 2016.

TDS under section 194D shall be deducted 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.

Time of deposit

In case the deduction is by or on behalf of the government then Tax at source as deducted has to be deposited on the same day.

In other cases, TDS has to be deposited within one week from the end of the month in which such TDS has been deducted from the source of income. If the amount is credited or paid on the last day of the financial year i.e. 31st march then TDS has to be deposited within 2 months from the end of the financial year in which it is credited or paid.

The assessing officer on your application may allow deduction of Tax at Source in special cases on quarterly basis i.e.  15th July, 15th October, 15th January and 15th April.

TDS at a lower rate under section 194D

Under section 197, the payee (i.e. the person receiving such insurance commission) can apply in form no: 13 to the assessing officer for lower deduction of TDS from his insurance commission. If the assessing officer is satisfied then a certificate will be issued to the assessee for lower deduction of income tax. Such certificate has to be produced to the concern person deducting TDS under section 194D for lower deduction and the person deducting TDS has to deduct it at such lower rate and for the period as stated in the certificate.

4 thoughts on “TDS under section 194D – Insurance Commission

  1. Suvra Banerjee

    I am having a money back insurance policy. I have received Rs.22500/- during previous FY . Out of rs.22500/- LIC has deducted Rs.450/- as tax and deposited the same with IT authority. What will be the treatment of Rs.22500/- in my IT return? The entire amount cannot be considered as other income. In such case I have to pay additional tax. Deduction of Rs.450/- comes under Section 194D of IT Act. Please clarify.

    Reply
    1. Sumit Kumar Jha

      Dear Mr. Suvra,
      You have to show it under schedule of exempt income, you can claim for refund, if your total income is below then taxable income.

      Sumit Jha

      Reply

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