Insurance policies are beneficial when it is all about a financial crisis based on various medical issues. So, it is a must-have plan to go for insurance coverage for both you and your immediate dependents. Usually, customers go to purchase insurance through any broker or agent. Sometimes, there are intermediaries too.
The insurance companies or commission will be subjected to the TDS under section 194D of the Income Tax Act when those brokers or agents will receive all circumstances. In this article, you will find out all those details related to the 194D of the Income Tax Act.
194D of Income Tax Act: What is 194D TDS?
Section 194D covers the TDS on all kinds of insurance premiums. Also, there are two types of payment.
- Any remuneration mentioned in the documents of the commission
- For procuring insurance business
The deduction must have been done when the amount was credited to the payee’s account. Also, if the payment is made via online or offline mode, then this will also be considered the same. Only if the tax is fully paid or payable, then the total amount of the tax will be deductible.
Learn about: section 10 10d
194D of Income Tax Act: Who is eligible for this act?
Those who make payments to a resident of India in the form of a reward should deduct tax. The tax will be considered a part of the insurance business.
But one thing that should be followed properly is that section 194D will only be applicable to the residents of India only. If this is happening to any non-resident, then section 195 will take charge.
194D of Income Tax Act: How much money is deducted and when to deduct?
Usually, the tax deduction happens in these below-mentioned cases.
- When the credit is done by the Commission in the payee’s account
- When the actual payment is made via any offline mode like cash, cheque, or draft
According to section 194D, there are variations in the deduction rate.
- Individuals: 5%
- Domestic companies: 10%
If there is no PAN provided by the payee, there will be an additional 20% tax deduction. Also, keep in mind that the rates will not be applicable to SHEC.
see also about: 194h of income tax act
194D of Income Tax Act: What are Form 13 and Form 15G?
The agent of the insurance may provide a Form 13 to send to the assessment office. This application will be considered the certificate which allows the withholding of TDS at a very lower rate.
Another important factor is Form 15. It will be provided by the deductor. And this will be sent to the Principal Commissioner.
194D of Income Tax Act: Exceptional cases
There are a few exceptional cases based on section 10 (10D). There will be exemptions when the following procedures are done.
- In case there is any fund acquired under sections 80DD (3) and 80DDA (3)
- Any LIC policy after April 1, 2012, with more than a 10% premium rate
- Any LIC policy after April 1, 2013, with more than a 15% premium rate
- Any request made under section 10(10D)
FAQs
What is the 194D of the Income Tax Act?
Section 194D covers TDS on any insurance and the insurance premium.
Are 194D and 194H the same?
194D is considered for the payment of insurance, and on the other hand, 194H is considered for a brokerage commission.
Who will be qualified for the TDS deduction?
Only employers and authorities which have a valid TAN are eligible for filing TDS returns.
What is the payable amount limit for the TDS deduction?
Rs 15000 in the financial year is the limit for the TDS deduction.
Who pays the TDS deduction?
The buyer pays for the TDS.
Is GST applicable to commission earnings?
Yes, GST is applied.
What is the section 195 TDS rate?
In the case of section 195, the TDS rate will vary from 10% to 30%.
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