Section 194D of the Income Tax Act: TDS on Insurance Commission

It is suggested that every individual must get an insurance policy to cover for any unexpected financial burden. You can buy insurance policies through online websites, agents, or brokers. It is important to note that the commission, remuneration, or reward earned by these agents/brokers are subject to TDS (Tax Deducted at Source) under Section 194D of the Income Tax Act.

What is the Rate of TDS?

Section 194D applies to a resident irrespective of whether they are an individual, company, or any other category of persons. The TDS rate under Section 194D is as follows:

Details	TDS Rate
Persons other than a company	5%
Domestic companies	10%
If the payee does not furnish PAN details	20%

Note: Surcharge or SHEC will not included in the above rates. Hence, the tax is deducted at source at the aforementioned rates.

Eligibility of Tax Deduction

An entity shall deduct TDS when making the payment to a resident person as remuneration, reward, or commission for the following reasons:

Bringing/obtaining insurance business
Ensuring continuance, renewal, or revival of insurance policies

Exceptions on TDS Deductions

Here are two instances when you can opt for an income tax exemption:

The commission amount does not exceed ₹15,000
A self-declaration form 15G/15H has been submitted by the payee

Time Limit for TDS Deductions

Here are the instances when taxpayers need to deduct the TDS amount under Section 194 of the Income Tax Act (whichever is earlier):

When the money is credited to the payee's account
When the payment is made in cash, draft, cheque or through other modes

Zero or Lower Tax Deduction

Under Section 197 of the aforementioned act, you can submit Form 13 to the Assessing Officer to deduct a lower no nil TDS. According to Section 206AA(4), no certificate shall be given for non-deduction or a lower rate of TDS unless the applicant provides the PAN details.

TDS Under Section 194D

Check out the due date to deposit TDS and issuance of TDS certificate as per Section 194D of the Income Tax Act:

1. Due Date to Deposit TDS

The due date to deduct and deposit the TDS amount on commission is the 7th of the next month.

2. Due Date to Issue TDS Certificates

The payee will receive TDS certificates which summarise the insurance commission payments and the deducted TDS. The due dates for the receipt of these certificates are as follows:

Months	Deadline for Issuing the Certificate
April – June	August 15
July – September	November 15
October – December	February 15
January – March	June 15

Which form is applicable for Section 194D?

The Form 26AS will reflect the deduction of the TDS amount under Section 194D.

What is the late filing fee for TDS?

If you fail to file TDS within the due date, you will have to pay a late filing fee of ₹200 per day, as per the rules stated in Section 234E.

Is there any tax exemption under Section 194D?

Yes, you can avail income tax exemption if the commission does not exceed ₹15,000 or if you have submitted a self-declaration form 15G/15H.

When is TDS deducted under Section 194D?

Tax deduction on insurance commission under Section 194D of the Income Tax Act, 1961 is decided based on two circumstances. The payer will have to deduct tax when the money is credited to the payee's account.

They also need to deduct 194D TDS when the payment is made in cash, cheque, draft, or via other modes. The TDS deduction will depend on whichever of these happens first.