TaxTMI 
TaxTMI 
Clarification is needed that whether insurance companies need to deduct TDS out of payment made to Motor garages specifically in respect of Cashless claim ?
Applicability of TDS on payment made by Insurance Company to Motor garadges (Cashless Claim)
19 May 2020 
2 Replies 
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TDS on insurer payments may turn on whether the payment is compensatory capital or taxable revenue in nature.
Whether insurers must deduct TDS on cashless payments to authorized motor garages depends on the tax character of the payment to the recipient: compensation giving rise to permanent or temporary disablement is treated as a capital receipt and not taxable, whereas payments absent disablement are taxable. A tribunal decision held temporary disablement compensation to be a capital receipt not includible in income. Thus insurer TDS liability on payments routed to garages requires assessment of whether the specific payment is taxable or capital in nature. (AI Summary)
Whether insurers must deduct TDS on cashless payments to authorized motor garages depends on the tax character of the payment to the recipient: compensation giving rise to permanent or temporary disablement is treated as a capital receipt and not taxable, whereas payments absent disablement are taxable. A tribunal decision held temporary disablement compensation to be a capital receipt not includible in income. Thus insurer TDS liability on payments routed to garages requires assessment of whether the specific payment is taxable or capital in nature. (AI Summary)