7 DTDS on Commission concerns mainly those insurance agents who earns a commission or brokerage.
Insurance agents on selling insurance, charge a commission or brokerage from the insurance companies. This is income of those agents and tax is deducted at source from these incomes by the company.
• TDS on Commission or brokerage rates at present is 5% for the individual insurance agents, where such commission exceeds the amount of Rs 15,000.
• Before the 2016-17 financial year, this rate was 10%.
• For a domestic company, the same rate is fixed at 10%.
• In case, PAN number has not been made available to the government by the payee, then, TDS rates on Commission increases to 20% in all cases.
• Those taxpayer or insurance agents in this case, can claim any remission on rates or exemption from paying any TDS, by approaching the evaluating officer, under section 197 of the Income Tax Act, 1961.
Who is exempted?
• In 2017 budget presentation, then finance minister had announced that, those individual insurance agents whose annual income from commission or brokerage is less than the taxable limit of Rs 2,50,000, will be exempted from paying any TDS.
• As a result, individual insurance agents will have to submit an application for the same to the assessing officer claiming remission or returns of tax, as the case maybe, under Form 13(for reduction) and Form 15G/15H(for exemption), under section 197.
• Upon evaluating the application, if found eligible, then the assessing officer will issue a certificate to the taxpayer containing details of the same.
• To avail the benefits of no-TDS, individual agents or taxpayer will have to submit that certificate with the insurance companies.
• Apart from this, those individual insurance agents whose commission do not exceed Rs 15,000, will also be exempted from paying any taxes at source.
Due date of depositing TDS
• When TDS on commission is deducted by or on behalf of the government, then same must be deposited with the government at the end of the same day.
• Otherwise, it must be deposited within a week if deducting, subject to the end of the month.
• The assessing officer have the discretion to made the process of submitting the TDS quarterly as per the convenience.
Note: – In case, the tax is deducted on March 31st, which is the end of the financial year then same should be deposited in the next financial year within 2 months of it’s credit or payment.
Issuance of TDS certificate
It is must for the deductor to issue TDS certificate to the taxpayer on time, failing which may incur a penalty. Mainly there are 2 categories of deductions and due date of issuing certificate is also different for both of them. That are –
• Government Deductor –
1. For First quarter (1st April to 30th June) – 15th August
2. For Second quarter (1st July to 30th September) – 15th November
3. For Third quarter (1st October to 31st December) – 15th February
4. For Fourth quarter (1st January to 31st March) – 30th May
• Non-government Deductor –
1. For First quarter (1st April to 30th June) – 30th July
2. For Second quarter (1st July to 30th September) – 30th October
3. For Third quarter (1st October to 31st December) – 30th January
4. For l Fourth quarter (1st January to 31st March) – 30th May
Section 194DA read with section 10(10D) of Income Tax Act, 1961
• Section 10(10D) talks about the taxable insurance policies, when insurance premium, paid by the insured person, exceeds 10% of the total amount insured in the same year.
• This rate of 10% is for the policies issued from the date of 1st April, 2012.
• For the policies issued between the dates of 1st April, 2003 to 31st March, 2012, the same rate is fixed at 20%.
• Person with a disability or mental retardation or such other disability, have been provided with a concession in this regard. The rate of insurance premium of total amount insured is relaxed to 15% for them for the policies issued after 1st April, 2012.
• So, in case of any scenario, mentioned above, if the premium amount exceeds the said limit of 10%, 15%, 20%, as the case maybe, it would amount to taxation or deduction in the hands of the insured person on the whole proceeds of the same year.
• The rate of deduction in all above mentioned cases are fixed at 2%.
• However, in case the insured person dies and the insurance is transferred to the nominee, then the TDS in that case, gets exempted, even if the premium proceeds exceed the said percentage in any year.
• Proceeds of Keyman Insurance Policy is not exempted from paying taxes under section 10(10D) of the Income Tax Act.
• Here again, one thing to note is, if the insured person does not provide his PAN number while buying insurance to the insurance companies, then the rate of deduction will be 20%.
• Upon maturity of the insurance proceeds, if the total proceeds do not exceed to the amount of Rs 1,00,000, then also no TDS will be deducted by the insurance companies.
TDS on Commission Benefits
Overall with the new government order in the year 2017, it has been a great relief for the individual insurance agents. With the TDS exemption of the lower income agents and reduction of the rate from 10% to 5% in 2016 has been very relaxing and beneficial to the individual agents.
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