Section 194D : TDS on Insurance Commission

What is Section 194D?

Section 194D covers the provisions relating to deduction of TDS on insurance commission. As per provisions of section 194D, the person who is responsible for making payment to a resident person, as remuneration/ rewards, by the way of commission or for the following purposes:

  • For Soliciting / procuring insurance business; or
  • For the continuance, renewal, or revival of an insurance policy.

TDS is required to be deducted only when the aggregate of the amounts of such income credited or paid or likely to be paid or credited during the financial year exceeds INR 15,000 (Applicable from June 1st 2016).

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

When is TDS deducted?

The deduction of tax on insurance commission under Section 194D shall be earlier of the following:

  • The credit of commission to the account of the payee(reciever), or
  • The actual payment in cash or cheque or in kind.

There are 2 instances when TDS is not deductible under Section 194D:

  • Commission paid does not exceed INR 15,000
  • Self-declaration under Form 15G/ 15H
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS under Section 194D

If the provisions of section 194D of the Income Tax Act, 1961 is applicable, the Deductor shall deduct TDS at the following rates:

Particulars Rate of TDS
Domestic Company 10%
A Resident person other than Domestic Company 5%

The rate of TDS will be 20% in cases where the deductee has not quoted PAN.

TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
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TDS Calculator
Tax Deducted at Source (TDS) is a part of Income Tax. TDS should be deducted by a person for specific payments made.
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TDS Certificate

Deductors of tax shall issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. You can download a certificate from here. The due dates for receipt of TDS certificates are as below:

TDS for the QuarterDue-Date
April-June15th August
July-September15th November
October-December15th February
January-March15th June
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]
TDS Return (26Q) for Non-Salary Payments (Annual)
CA Assisted TDS return filing plan for employers, firms and companies making payment of Professional fees, Rent, Contracts, Commission, etc.
[Rated 4.8 stars by customers like you]

TDS Return

The Deductor liable to deduct tax under section 193 of the Income Tax Act shall file quarterly return in Form 26Q.

FAQs

What if TDS is not deducted?

The Deductor liable to deduct TDS as per provisions of section 194D fails to deduct the same, then, in such case the Deductor is liable to pay interest @ 1% per month from the date on which tax was deductible till the date TDS actually deducted.

Whether TDS u/s 194D is deductible on commission paid on reinsurance accepted by assessee?

No, TDS is not deductible on commission paid on reinsurance.

Can the payee request the payer not to deduct tax at source and to pay the amount without deduction of tax at source?

A payee can approach to the payer for non-deduction of tax at source but for that they have to furnish a declaration in Form No. 15G/15H.
Form No. 15G is for the individual or a person (other than company or firm) and Form No. 15H is for the senior citizens.

Got Questions? Ask Away!

  1. Hey @Dia_malhotra

    As per section 194A, TDS on interest other than interest on securities is required to be deducted by any person other than Individual or HUF at the rate of 10%, when paid to a resident. No surcharge, education cess or SHEC shall be added to the above rate.

    Hope this helps!

  2. Hey @HarishMehta

    TDS u/s 194J needs to be deducted by deductor other than an individual or a HUF, @ 10% on any amount paid or payable to any which is in excess of INR 30,000 as:

    1. Fees for professional services
    2. Fees for technical services
    3. Any remuneration or fees or commission by whatever name called paid to a director ( other than salary)
    4. Royalty
    5. Any sum referred to in clause (VA) of section 28.

    Hope this helps!

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