TaxTMI 
TaxTMI 
Evolution and Harmonization of TDS Provisions on Insurance Commission in Indian Tax Law : Clause 393(1)[Table: S.No.1(i)] of the Income Tax Bill, 2025 Vs. Section 194D of the Income-tax Act, 1961,
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....rnment receives tax revenues at the point of income accrual or payment, thereby reducing the risk of tax evasion and improving compliance. Section 194D, a longstanding provision of the Income-tax Act, 1961, has formed the bedrock for TDS on insurance commission payments for several decades. The introduction of Clause 393(1) in the Income Tax Bill, 2025, represents a comprehensive restructuring and rationalization of TDS provisions in the proposed new tax code, with the aim of enhancing clarity, modernizing compliance, and addressing contemporary business realities. This commentary provides a detailed analysis of Clause 393(1)[Table: S.No.1(i)], its legislative purpose, operative mechanics, practical implications, and a comparative assessmen....
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....duce ambiguity and litigation. 3. Detailed Analysis of the Clause 393(1)[Table: S.No.1(i)] of the Income Tax Bill, 2025 Structure and Provisions * Nature of Income: Income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of insurance policies). * Payer: Any person. * Rate: Rates in force. * Threshold Limit: Rs. 20,000. Operative Mechanism: * TDS is to be deducted on the entire amount of such income if the aggregate amount exceeds Rs. 20,000 during the tax year. * Deduction is required at the time of credit or payment, whichever is earlier. * The provision applies to all payers, ....
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....arlier, deduct income-tax thereon at the rates in force. * No deduction if the aggregate amount paid or credited during the financial year does not exceed Rs. 20,000 (as per Finance Act, 2025). Key Features: * Scope: Similar to Clause 393(1), covers commission and other remuneration for insurance business solicitation, renewal, or revival. * Payer: "Any person responsible for paying," which has been interpreted to include insurance companies, agents, brokers, etc. * Threshold: Rs. 20,000 per financial year (recently increased from Rs. 15,000). * Rate: "Rates in force," as notified in the Finance Act for the relevant assessment year. * Time of Deduction: At the earlier of credit or payment. Interpretative Notes: * The provisi....
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.... Relief by way of Section 197 (certificate for lower/nil deduction) and Section 197A (declaration for non-deduction) Legislative Modernization Part of a comprehensive table for all TDS provisions, facilitating easier compliance and administration Legacy structure, subject to piecemeal amendments over the years Other Procedural Aspects Explicitly covers payment in any mode, including electronic transfers; clarifies credit to suspense accounts is deemed credit to payee Similar, but procedural clarifications often found in rules, notifications, or judicial pronouncements Interpretative Issues and Ambiguities Scope of "Remuneration or Reward": Both provisions use broad language, including "remuneration or reward, whether by way of....
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....cations 1. For Insurance Companies and Payers * Compliance Burden: Insurance companies and other payers must establish robust systems to track aggregate payments to each payee, ensure timely deduction and deposit of TDS, and maintain records for audit and regulatory purposes. * Systemic Modernization: The tabular format and explicit cross-referencing in Clause 393 facilitate automation and integration with digital payment systems, reducing manual errors and enhancing compliance. * Reconciliation Challenges: Aggregating payments across branches and ensuring that the threshold is not breached without deduction can be operationally challenging. 2. For Insurance Agents and Intermediaries * Cash Flow Impact: TDS reduces the cash inflow....