-
April 17, 2023
TDS on Insurance Commission: Understanding the Tax Deduction at Source
Introduction
Insurance agents earn a commission on the premium paid by the policyholder, which is calculated as a percentage of the premium. However, it’s crucial to understand the implications of TDS on insurance commission, which stands for Tax Deducted at Source.
What is TDS on Insurance Commission?
TDS on insurance commission is the tax deducted by the insurer while paying commission to the agent, and it is only applicable if the commission paid to the agent exceeds Rs. 15,000 in a financial year. The insurer needs to deduct TDS at the rate of 5% and deposit it with the government within a specified time period. The agent is also issued a TDS certificate known as Form 16A.
Implications of TDS on Insurance Commission for Agents
Reduction in Commission: TDS on insurance commission reduces the amount of commission received by the agent from the insurer.
Claiming Credit: Agents need to ensure that the insurer has deducted TDS and issued Form 16A. They need to claim credit for TDS deducted while filing their income tax return; failure to do so can lead to a higher tax liability.
TAN Requirement: If an agent’s commission exceeds Rs. 50 lakhs in a financial year, they need to obtain a Tax Deduction and Collection Account Number (TAN) and deduct TDS on payments made to sub-agents or employees.
Record-Keeping: Agents must maintain proper records of their income and expenses, including the tax deducted at source by insurers, to calculate their tax liability accurately.
TDS on Insurance Commission
- Only applicable if the commission paid to the agent exceeds Rs. 15,000 in a financial year
- Deducted at a rate of 5% by the insurer
- Needs to be deposited with the government within a specified time period
- TDS certificate issued to the agent in the form of Form 16A
- Agents must claim credit for TDS deducted while filing their income tax return
- If an agent’s commission exceeds Rs. 50 lakhs in a financial year, they need to obtain a TAN and the Tax Deduction at Source on payments made to sub-agents or employees
- Proper record-keeping of income and expenses is essential for accurate tax liability calculation
Conclusion
TDS on insurance commission is an important tax consideration for insurance agents, and non-compliance can lead to penalties. Agents must be aware of their TDS obligations and comply with them to ensure accurate tax liability calculation and avoid penalties.
File TDS Returns
Quickly file error-free TDS Returns with EbizFiling. This ensures seamless credit to the deductee. Prices Starting INR 999/-.
About Ebizfiling -
Reviews
Akash Shinde
09 Apr 2022It was a wonderful experience with ebiz filing I had opted for company incorporation package specially Ayushi Mam and Pulkit sir they helped me a lot .Thank you so much dear mam and sir It was very smooth process.I will recommend to everyone
Devangi Patnayak
11 Mar 2018I am very happy with the way they serve their clients. They are focused on providing the best help that they can and are result oriented.
Naren Makhecha
16 Jun 2018Experienced people works at Ebizfiling and have really prompt solutions to your compliance problems. It was great working with you and the team.
January 2, 2026 By Dhruvi D
Should TRPs expand services beyond tax returns? At Beginning, For many Tax Return Preparers, the work begins and ends with tax returns. And for a long time, that made complete sense. Clients came once or twice a year, filed their […]
January 2, 2026 By Dhruvi D
Key Taxation and Financial Regulation Updates from April 1, 2025 Introduction As the new financial year begins, several important changes in taxation and financial rules will come into effect from April 1, 2025. These updates will impact individuals, businesses, and […]
January 1, 2026 By Dhruvi D
How can tax preparers guide clients on company compliance? Most tax preparers meet clients when something is already due. A return has to be filed. A notice has arrived. A deadline is close. That is how the relationship usually begins. […]