There is something to cheer for insurance intermediaries in the fine print of Budget 2016.
The Budget 2016 has proposed to reduce the rate of tax deducted at source (TDS) on insurance commissions from 10% to 5%. However, the threshold limit of this deduction will go down from Rs.20,000 to Rs.15,000.
Currently, insurance companies deduct TDS of 10% on commission amount exceeding Rs.20,000. Agents can claim refund on this TDS based on their tax liability at the time of filing returns.
Agents stand to gain from the budget proposal. A rough calculation shows that on a gross commission of Rs.60,000, agents will have to cough up TDS of Rs.3,000 instead of Rs.6,000.
Meanwhile, agents can approach the income tax authority for lower deduction of TDS from their commission income through ‘form 13’ under Section 197. The certificate will be issued to distributors if the assessing officer is satisfied with the request. To avail this benefit, agents have to submit this certificate to the insurers.
Insurance intermediaries have welcomed this move and believe that it will attract more agents in the insurance industry.
