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What is Section 194D and Section 194DA under Income Tax Act?

Updated on: 23 Nov, 2023 01:22 AM

In this part of our TDS series, we’ll further simplify 2 more important tax deduction provisions which are as follows:
TDS on Insurance Commission: Section 194D
TDS on Payment of Life Insurance Policy: Section 194DA

Section 194D: TDS on Insurance Commission

This provision of tax deduction mostly hits people who work as insurance agents for companies like LIC, HDFC Insurance, ICICI Insurance etc.

Who is required to deduct TDS u/s 194D?

Any person who pays to resident an income in the form of remuneration or reward (as commission or otherwise) for generating insurance business.

What is the rate & time of tax deduction u/s 194D?

The rate of tax u/s 194D is 5%(Resident person other than the company)/10%( Domestic company) ( as the case may be) and 20% if the deductee doe not quote his PAN. And the time of deduction is earlier of, the credit of income to the account of the payee (receiver) or actual payment (in cash, cheque, draft or other modes).

No TDS Requirement:

If the amount of such income (whether individually or in aggregate for the financial year) does not exceed Rs. 15000 or if Form 15G/H has been received, then no TDS u/s 194D is required.

Section 194DA: TDS on Payment of Life Insurance Policy

It won’t be wrong to say that, every 8 out of 10 people in India opt for Life Insurance Policy. And why not, no one can predict the future, hence to save oneself from any future mishap people go for life insurance.
But you’ll be surprised to know that payment received on maturity of insurance policy attracts provisions of tax deduction u/s 194DA if the policy is not exempt under section 10(10D). Let’s understand it as follows:

Who is required to deduct TDS u/s 194DA?

Any person who is paying an amount to a resident by way of an insurance policy (including bonus amount, if any) will have to deduct tax before releasing the amount.

What is the rate & time of tax deduction u/s 194DA?

The rate of tax u/s 194DA is 5% at the time of making the payment. (20% if the deductee doe not quote his PAN)

No TDS Requirement :

In the below-mentioned situations, no TDS will be required u/s 194DA.

  • Where the amount of such payment (or aggregate amount during the financial year) is less than Rs.1,00,000.
  • Where the amount of insurance received is as per the following cases:

Section 194D Infographic

Frequently Asked Questions

Q- What is the percentage of TDS on commission?

The rate of deduction of TDS is 5%.

Q- Is TDS applicable on incentives paid to employees?

Yes, TDS is deducted if the total income of the assessee exceeds the total amount which is not charged under tax.

Q- What is the tax on commission?

TDS on commission is 5%

Q- Is GST applicable on commission income?

On commission income GST is chargeable as per the prescribed rates.

Q- What is the TDS rate under section 195?

Section 195 is the sec of TDS deducted on the non-resident. There are various rate for TDS under section 195 these are covered under 10% to 30% bracket.

Q- Who should deduct TDS on commission?

Any person who is liable to pay any type of commission or brokerage is liable for tax deduction on commission payment made.

Q- What is the threshold limit for TDS on commission?

The threshold limit for TDS on commission is 15000.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.