{"id":28121,"date":"2021-03-27T11:03:18","date_gmt":"2021-03-27T05:33:18","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=28121"},"modified":"2024-07-06T18:06:59","modified_gmt":"2024-07-06T12:36:59","slug":"section-194d-section-194da-under-it-act","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/section-194d-section-194da-under-it-act\/","title":{"rendered":"What is Section 194D &#038; Section 194DA under IT Act?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Similar to tax deduction done at multiple income sources such as house rent, interest income, and salary, TDS can be done on life insurance and insurance commission payments. Section 194DA &amp; Section 194D under the IT act, 1961 are the provisions applicable, respectively.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-is-Section-194D-Section-194DA-under-Income-Tax-Act-1.png\" alt=\"Section 194D &amp; Section 194DA under IT Act\" class=\"wp-image-28325\" width=\"547\" height=\"499\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-is-Section-194D-Section-194DA-under-Income-Tax-Act-1.png 900w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-is-Section-194D-Section-194DA-under-Income-Tax-Act-1-300x274.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-is-Section-194D-Section-194DA-under-Income-Tax-Act-1-768x701.png 768w\" sizes=\"(max-width: 547px) 100vw, 547px\" \/><\/figure><\/div>\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/section-194d-section-194da-under-it-act\/#What_is_the_Significance_of_Section_194D\" >What is the Significance of Section 194D?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/section-194d-section-194da-under-it-act\/#What_is_the_Significance_of_Section_194DA\" >What is the Significance of Section 194DA?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/section-194d-section-194da-under-it-act\/#Tabular_Representation_of_TDS_Rate_Chart\" >Tabular Representation of TDS Rate Chart<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/section-194d-section-194da-under-it-act\/#Latest_Update_as_per_the_Union_Budget_2021\" >Latest Update as per the Union Budget 2021<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/section-194d-section-194da-under-it-act\/#Important_Points_to_be_Remembered_by_the_Taxpayers\" >Important Points to be Remembered by the Taxpayers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/section-194d-section-194da-under-it-act\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Significance_of_Section_194D\"><\/span>What is the Significance of Section 194D?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 194D encompasses payments by way of reward\/remuneration\nin the form of commission or otherwise insurance business (including a business\nthat deals with the continuance, revival of insurance policies). The deduction\nshould be made at the time of transferring the money to the account of the\npayee or at the event of payment in the form of a cheque, cash, draft, or any\nother mode. Tax is applicable only if the amount paid or the total of the\namounts of such income paid or payable during the financial years surpasses INR\n15000.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Deduction of Taxes u\/s 194D<\/h3>\n\n\n\n<p>Any individual who transfers a payment to an Indian national in the form of reward or remuneration as part of the <em><strong>insurance<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Insurance\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> business should deduct tax.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Tax Implications u\/s 194D<\/h3>\n\n\n\n<p><strong><em>Tax is applicable to the earlier of the given cases:-<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li>At the time of crediting commission to the account of the payee.<\/li>\n\n\n\n<li>When the actual payment is made in the draft, cash, cheque, or other modes.<\/li>\n\n\n\n<li>As per Section 194D, the tax is deducted at different rates based on the type of payee:-\n<ul>\n<li>Individuals: 5%<\/li>\n\n\n\n<li>Domestic companies: 10%<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p>If the payee does not mention the PAN, the tax will be levied @20%.\nIt\u2019s worth noting that Surcharge will be imposed on these rates.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Applicable Exceptions<\/h3>\n\n\n\n<p>The tax would not be applicable on the amount the payer transfer\nto the payee\u2019s account in the given scenarios:-<\/p>\n\n\n\n<ul>\n<li>The commission credited is within INR 15,000.<\/li>\n\n\n\n<li>A self-declaration is available u\/s 15G\/15H.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Significance_of_Section_194DA\"><\/span>What is the Significance of Section 194DA?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Any payment to be credited to Indian national upon the maturity of the insurance policy, including the bonus, other than the amount available under clause (10D) of Section 10, will be subjected to <a href=\"https:\/\/corpbiz.io\/tds-return-filing\"><strong>TDS<\/strong><\/a>. <\/p>\n\n\n\n<p>Any individual who credits the payment to the Indian national\nafter the maturity of the life insurance policy is liable to deduct applicable\nTDS as per Section 194 DA.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Tax Implications u\/s 194DA<\/h3>\n\n\n\n<p>Tax is applicable @1% at the time of crediting the payment to\nthe payee account. The union budget 2019 has proposed to amend the TDS on\ninsurance policy proceeds to 5% on the income comprised in the proceeds paid or\npayable upon maturity.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Deduction of Taxes u\/s 194DA<\/h3>\n\n\n\n<p>There is no need to levied taxes if the total payable amount is\nwithin INR 1 Lakh.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Applicability of the section 194D<\/h3>\n\n\n\n<p>Let\u2019s say Mr. Prakash received a maturity amount of Rs 10 lakh\nfrom this life insurance policy. Mr. Prakash has paid the amount of Rs 3.5 lakh\nas a premium over the span of 10 years. In such a scenario, the maturity amount\nis about Rs 1 lakh. <\/p>\n\n\n\n<p>Henceforth, the maturity proceeds will be credited after\ndeducting TDS @ 1%. In this case, the tax deduction at source would be Rs\n10,000 after Mr. Prakash receives Rs 9, 90,000.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Lower Tax Deduction u\/s 194D<\/h3>\n\n\n\n<p>If you reap commission via an insurance business, you can send\nform 13 to the concerned official requesting a certificate that legalizes the\npayer to skip or carry on with tax deduction at a lower rate. This provision is\navailable u\/s 197. However, Section 206AA (4) states that the lower deduction\nrate or non-deduction is not applicable unless the taxpayer has quoted PAN. <\/p>\n\n\n\n<p>The deductee\/ recipient will receive a certificate regarding TDS\nreflecting the insurance commission payment &amp; the TDS thereon.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Tabular_Representation_of_TDS_Rate_Chart\"><\/span>Tabular Representation of TDS Rate Chart <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<table class=\"table table-bordered\">\n<tbody>\n<tr>\n<td><strong>Section<\/strong><\/td>\n<td><strong>Nature<\/strong><\/td>\n<td><strong>Cut off (INR)<\/strong><\/td>\n<td><strong>Individual\/ HUF\/ Other<\/strong><\/td>\n<\/tr>\n<tr>\n<td>194D<\/td>\n<td>Insurance commission<\/td>\n<td>15000<\/td>\n<td style=\"text-align: center;\">5%<\/td>\n<\/tr>\n<tr>\n<td>194DA<\/td>\n<td>Life Insurance<\/td>\n<td>100000<\/td>\n<td style=\"text-align: center;\">1%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Latest_Update_as_per_the_Union_Budget_2021\"><\/span>Latest Update as per the Union Budget 2021<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li>No changes in the IT slab rate (including old and new)<\/li>\n\n\n\n<li>No <a href=\"https:\/\/corpbiz.io\/income-tax-return-filing\"><strong>ITR filing<\/strong><\/a> requirement for Senior citizen (aged 75 years and above) having only pension &amp; interest income.<\/li>\n\n\n\n<li>No change in HEC rates, Surcharge, and standard deduction.<\/li>\n\n\n\n<li>No change in the income tax rate as per the section 24(b), 80C &amp; other sections as per chapter VI-A.<\/li>\n\n\n\n<li>Benefit under section extended to an additional one year, i.e., up to 31 March 2022.<\/li>\n\n\n\n<li>Section 80EEA:-&nbsp;timeline for loan approval is extended till 31 March 2022.<\/li>\n<\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/search-cases-under-section-153d-of-the-it-act-1961\/\">Search Cases under Section 153D of the IT Act, 1961: Lawfulness of Prior approval for assessment<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Important_Points_to_be_Remembered_by_the_Taxpayers\"><\/span>Important Points to be Remembered by the Taxpayers<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li>The percentage of TDS on the commission has been capped at 5%<\/li>\n\n\n\n<li>TDS will be imposed if the assessee\u2019s total income surpasses the total amount, which is not chargeable.<\/li>\n\n\n\n<li>Commission income is taxable under the GST regime.<\/li>\n\n\n\n<li>Section 195 talks about the TDS applicability on the non-resident. There are multiple taxes for TDS u\/s 195. These are set under the 10% to 30% bracket.<\/li>\n\n\n\n<li>The threshold limit related to TDS on the commission has been set at Rs 15000.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To sum up, section 194D\ntalks about the tax implication on the commission earned by the insurance agent\nafter selling the policy. If the assured sum of the commission earned by the\nagent surpasses the max- threshold limit, i.e. Rs 15000 annually, then 5% of\ntax will be imposed on such income. <\/p>\n\n\n\n<p>Meanwhile, section 194DA deals with the LIC withdrawals, and it states that LIC withdrawal that is taxable under the IT Act will be subjected to 1% TDS if the amount for such withdrawal exceeds Rs 1,00,000.&nbsp; Drop your queries in the comment section in case you have any regarding this topic. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/mistakes-while-filing-income-tax-return\/\">Mistakes While Filing Income Tax Return: Procedure of Rectification<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Similar to tax deduction done at multiple income sources such as house rent, interest income, and salary, TDS can be done on life insurance and insurance commission payments. Section 194DA &amp; Section 194D under the IT act, 1961 are the provisions applicable, respectively. What is the Significance of Section 194D? Section 194D encompasses payments by [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":28197,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[10],"tags":[1626],"acf":{"service_id":"403"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":6894,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28121"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=28121"}],"version-history":[{"count":16,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28121\/revisions"}],"predecessor-version":[{"id":65260,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28121\/revisions\/65260"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/28197"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=28121"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=28121"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=28121"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}