Insurance does go a long way when it comes to mitigation during a financial crisis that has been caused by medical emergencies. Therefore, it is best advised to take an insurance policy not only for yourself but also for dependents as well.
Most of the time, people would choose to get insurance through agents, brokers, and more. In these cases, the insurance commission or other remunerations that have been received by such agents and brokers will be subject to TDS under 194D of the Income Tax Act.
Section 194D covers TDS on Insurance Premium or any of the payments that are mentioned below:
This deduction needs to be made during the time of crediting the money to the payee's account or at the time of payments in the form of a cheque, cash, draft, or any other mode. The tax is deductible only when the amount that is paid or is payable or the aggregate of the amount (money) of such income paid or payable during the financial year is more than Rs. 15,000.
The person that is responsible for making a payment to a resident of the country for the following income needs to deduct TDS:
The income by way of remuneration, reward, or commission:
Section 194D is applicable only to Indian residents who are individuals, HUF, companies, or any other taxpayer. The TDS on the insurance commission paid to the non-resident in India is covered under Section 195.
Someone who is liable to deduct TDS needs to deduct TDS:
- at the time of crediting such income to the account of the agent or the payee.
- during the time of paying the agent in the case, cheque, DD, or any other payment.
Whichever one comes first.
Section 194D is applicable to a resident irrespective of whether they are individuals, a company, or any other category of people. The TDS rate under Section 194D is as follows:
The agent may deliver a Form 13 application to the assessment office. This application will be regarded as a certificate granting the payer permission to withhold TDS or to withhold it at a reduced rate.
According to section 206AA(4), in order to get a certificate under Section 197 for non-deduction or a reduced rate of deduction, the assessee must supply his or her PAN number. The deductor must withhold TDS at a rate of 20% in the event that the declaration is invalid.
A copy of Form 15G must be delivered by the deductor to the Principal Commissioner or Commissioner. The declaration must be turned in no later than the seventh day of the month after the one in which the deductor received it.
Interest is due if the TDS deductor forgets to deduct TDS when sending a payment. From the day the TDS was deductible until the date of actual deduction, the deductor must pay interest at a rate of 1% per month or part of a month.
Based on Section 10(10D), any amount received under the LIC policy, inclusive of the amount of bonus, is exempted, and the section has the following exemptions: