There is something to cheer for insurance intermediaries in the covid-19 stimulus package announced by the Prime Minister Narendra Modi yesterday.
The Union Finance Minister Nirmala Sitharaman announced that the government has decided to reduce tax deduction at source (TDS) for non-salaried individuals who receive payment by way of brokerage and commission by 25% with effect from May 14 to March 31, 2021 to provide more funds at the disposal of such individuals.
The move will benefit 22.78 lakh insurance agents who receive commission income from insurance companies. Currently, insurance companies deduct 5% on insurance commission if the commission income exceeds Rs.15000 per annum. Similarly, insurance companies deduct 10% TDS on commission payout of insurance distribution firms like corporate agents, brokers, insurance marketing firms and so on.
With this, insurance companies will deduct 3.75% and 7.5% TDS on insurance commission of their insurance agents and insurance intermediaries having company set up, respectively. Agents can claim refund on this TDS based on their tax liability at the time of filing returns.
Remember that insurance intermediaries do not pay GST on their commission income.
As on March 2020, there are close to 22.78 lakh agents in the life insurance industry.
