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The government has proposed reduction of the rate of tax deduction at source (TDS) applicable on commission income of insurance agents from April 1, 2025.
With this, insurance commission will be subject to TDS of 2% instead of 5%. This will provide more funds at the disposal of over 30 lakh individual agents.
In the Finance Bill memorandum, the government said, “It is proposed that the rates in force for deduction of income-tax at source on income by way of insurance commission shall be reduced from 5% to 2%, in view of the amendments made vide Finance (No. 2) Act, 2024 in section 194D (Payment of insurance commission) with effect from 1st day of April, 2025.”
Also, the government has increased threshold on applicability of TDS on commission income. With effect from April 1, 2025, the government has proposed increasing the TDS threshold on insurance agents from Rs.15000 to Rs.20000.
Please note that agents can claim refund on this TDS based on their tax liability at the time of filing returns.
Remember that, TDS is over and above GST. Also, remember that insurance commission is subject to GST from Re.1. There is no exemption or threshold limit like Rs.20 lakh in mutual funds for insurance agents.