In a major relief to insurance commission agents earning income out of insurance commissions in the Budget 2025-2026, Union Finance Minister Nirmala Sitharaman has proposed reduction of TDS Rate from 5% to 2% and increase in the deduction threshold from Rs. 15,000/- to Rs. 20,000/- under Section 194D of the Income Tax Act.
Clause 56 of the Finance Bill seeks to amend section 194D of the Income-tax Act relating to Insurance commission.
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Section 194D states that ,”Any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force:
Provided that no deduction shall be made under this section from any such income credited or paid before the 1st day of June, 1973]:
[Provided further that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed five thousand rupees.] [ Inserted by Act 11 of 1987, Section 48 (w.e.f. 1.6.1987).]”
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The said section, inter alia, provides that any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.
The second proviso to this section provides that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed fifteen thousand rupees.
It was proposed to amend the second provision of the said section so as to provide the threshold of aggregated amounts of such income for the requirement to deduct tax at source under this section is twenty thousand rupees.
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