Applicability of FBT and TDS

[Rahul Bagaria]

My is a Insurance Company.We deducted TDS while making Insurance commission payments to Agents.These agents are not our company employees.We have rolled out Incentive plan which says that if an Agent sells X number of policies if will qualify for a gold coin or Foreign.What will be the applicability of TDS in these cases.Will FBT will be attracted towards the company or can we deduct TDS from the agents at the time of issuing these awards and if so how?

[madhavvan n]

In my view the expenditure incurred for distribution of gold coins / foreign trip tds is to be deducted as per explanation given under to sec 194D , “insurance commission” will mean 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 continuance, renewal or revival of policies of insurance). As far as fringe benefits are concerned in the absence of employer employee relationship it is out the ambit of fbt expalantion of fbt is given below For the purposes of this Chapter, "fringe benefits" means any consideration for employment provided by way of— (a) any privilege, service, facility or amenity, directly or indirectly, provided by an employer, whether by way of reimbursement or otherwise, to his employees (including former employee or employees);

AI Summary

Insurance incentives like gold coins or trips are subject to TDS under Section 194D, not FBT. An insurance company inquired about the applicability of Tax Deducted at Source (TDS) and Fringe Benefit Tax (FBT) on incentives given to agents, such as gold coins or foreign trips, for selling a certain number of policies. The agents are not employees of the company. The response clarified that TDS should be deducted from these incentives under Section 194D, as they are considered insurance commission. Since there is no employer-employee relationship, FBT does not apply to these transactions.