Eligibility of Section 194D:
Under section 194D is applicable if any person is responsible for the payment to Indian resident person by way of remuneration or reward or commission
- For soliciting or procuring insurance business
- For business relating to the continuance, renewal, or revival of an insurance policy
- Section 194D of Income tax is applicable to only Resident of India and it is not applicable to non-resident in India .
- The TDS on an insurance commission paid to a non-resident in India is covered under section 195.
Time limit for Deduct of TDS under section 194D:
The person liable to deduct TDS must deduct TDS:
- At the time of crediting such income to the account of the agent or the payee
- At the time of paying the agent in cash, cheque, demand draft, or any other mode of payment
Whichever is earlier.
Rate of TDS under Section 194D:
Section 194D is applicable for all such payments made to a resident whether they are an individual, company or any other category of persons. The rate of TDS are mentioned below:
| Particulars | Rate of TDS |
|---|---|
| Person Other than Domestic Company | 5% |
| Domestic Company | 10% |
If the deductee fails to quote his/ her PAN to the deductor i.e. the insurance company then the TDS rate will be 20%.
TDS is not required to Deduct Under Section 194D:
There are two instances when TDS is not deducted under Section 194D:
- The total amount paid to the payee or the agent in a financial year is less than Rs 15,000
- The payee or the agent has provided Form 15G/ Form 15H as a self-declaration for no deduction of TDS.
Due date of TDS deposit and Filing of TDS returns:
The Deductor is liable to deposit TDS with the Government with following dates
| Particulars | Due date of Deposite |
|---|---|
| April-February | 7th of Next following next Month |
| March month | 30th April |
The Deductor is liable to File TDS Returns with the Government with following dates:
| Quarter | Due Date for Return |
|---|---|
| April to June | 31st of July |
| July to September | 31st of October |
| October to December | 31st of October |
| January to March | 31st of May |
Consequences of non-compliance of section 194D:
- In case the deductor of TDS fails to deduct TDS while making a payment to Government within due date then deductor need to pay interest @ 1% per month or part of month from the date on which the TDS was deductible till the date of actual deduction.
- The person is not eligible to claim the deduction of such expenses from PGBP income if TDS is not deducted on time. The amount of disallowed expenses shall be 30% of payment.
- However if TDS is deposited in subsequent years then expense will be allowed in the year of payment of TDS.
