Financial Year 1978-79
Circular No. 237 was issued by the Central Board of Direct Taxes on 15 April 1978. Its subject is Financial Year 1978-79.
Gives insurers the deduction rates and the working for insurance commission in the financial year 1978-79, following Circular No. 227 dated 14 July 1977. Section 194D requires deduction from insurance commission paid to a resident, whether an individual, a company or any other person, at the rates the year's Finance Act specifies, and on the rates proposed in the Finance Bill, 1978 a payee other than a company bears 10 per cent with no surcharge and a domestic company 22 per cent with 1 per cent surcharge. Commission to a non-resident is outside section 194D but within section 195: a non-corporate non-resident bears 34.5 per cent, being 30 per cent tax and 4.5 per cent surcharge, or the tax and surcharge on the slab rates as if the commission were his total income, whichever is higher, and a company that is neither an Indian company nor one that has made the arrangements prescribed by rule 27 for declaring and paying dividends in India bears 73.5 per cent, being 70 per cent tax and 3.5 per cent surcharge. Deduction on these rates applies to payments made after 31 March 1978, and fresh instructions were promised if Parliament changed the proposed rates. The working is then set out: insurance commission covers any remuneration or reward, by commission or otherwise, for soliciting or procuring insurance business, including continuance, renewal or revival of policies; deduction is made on amounts credited or paid after 31 May 1973 even if they accrued earlier; it is made at credit or payment, whichever is earlier; the tax goes into the Government account within one week from the last day of the month of deduction, or within two months of the end of the month in which the payer's accounting date falls where the commission is credited as on that date; the correct challan must be used for company and non-company payees with surcharge shown separately; and the tax is rounded to the nearest rupee under section 288B.
The yearly instruction to insurers on what to deduct from agents' commission, on the rates proposed in that year's Finance Bill.
FINANCIAL YEAR 1978-79
1782. Instructions for deduction of tax at source from insurance commission during financial year 1978-79 at the rates specified in Part II of First Schedule to Finance Bill, 1978
1. I am directed to invite a reference to this Department’s Circular No. 227 [F. No. 275/20/77-IT(B)], dated 14-7-1977 on the above subject.
2. Section 194D provides for the deduction of tax at source, at such rates as may be specified in this behalf by the Finance Act of the relevant year from payments of income by way of insurance commission, to a resident, whether an individual, a company or any other category of person. The rates for deduction of tax at source for the financial year 1978-79 proposed to be specified in Part II of the Schedule to the Finance Bill, 1978 as introduced in the Parliament, are as below:Income-tax
Surcharge
I.
In the case of a person other than a company
10 per cent
Nil ;
II.
In the case of a domestic company
22 per cent
1 per cent.
3. Though provisions of section 194D apply only in relation to income by way of insurance commission paid to residents, under the provisions of section 195 income-tax is required to be deducted from payments (including payments of income by way of insurance commission) made to non-corporate non-resident taxpayers as also to companies which are neither Indian companies nor companies which have made arrangements for declaration and payment of dividends within India as prescribed under rule 27. In the case of a person other than a company, who is not resident in India, the rate of deduction of tax at source, as specified in item 1(b)( i) of Part II of the First Schedule to the Finance Bill, 1978 is 34.5 per cent [income-tax 30 per cent plus surcharge 4.5 per cent] of the income by way of insurance commission or income-tax and surcharge thereon at the rates prescribed in Sub-Paragraph I of Paragraph A of Part III of the said Schedule, if such income had been the total income of such person, whichever is higher. In the case of a company which is not a domestic company, tax is to be deducted at the rate of 73.5 per cent [income-tax 70 per cent plus surcharge 3.5 per cent].
4. It is requested that deduction of tax at source from payments of income by way of insurance commission may be made during the financial year 1978-79 on payments made after March 31, 1978 according to the above rates. In case any changes in the rates proposed in the Finance Bill, 1978 are made by the Parliament, suitable instructions will be sent to you.
5. The substance of the main provisions in the law insofar as they relate to deduction of income-tax from insurance commission is given hereunder :
(1) For the purpose of deduction of tax at source, "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 reviving of policies of insurance).
(2) Income-tax will be deductible from the amount credited or paid after May 31, 1973 even if the relevant amounts accrued before that date.
(3) Deduction will be made at the time of the credit of the income to the account of, or the payment thereof (by whatever mode) to the payee, whichever is earlier.
(4) The tax deducted should be paid to the credit of the Central Government by remitting it into the Government Treasury or the office of the Reserve Bank of India or State Bank of India or any other authorised public sector bank within one week from the last day of the month in which the deduction is made. In cases where the income by way of insurance commission is credited to the account of the payee as on the date up to which the accounts of the business of the payer are made, the tax deducted therefrom may be paid to the credit of the Central Government within two months of the expiration of the month in which the date, up to which the accounts are made, falls.
(5) Blank challans for making payment of tax deducted at source can be obtained from the Income-tax Officer. The payments should be made on the appropriate challan, as indicated below :-
Deduction of tax from payment of insurance commission made to companies
Challan No. 2 (ITNS 39A)
-
Deduction of tax from payment of insurance commission made to non-companies
Challan No. 8 (ITNS 39A)
Where the payment of tax includes any surcharge it should be shown separately in the challan, at the space provided for that purpose.
(6) In view of the existing provisions in section 288B the amount of tax to be deducted at source should be rounded off to the nearest rupee by ignoring amounts less than 50 paise and increasing the amounts of 50 paise or more to one rupee.
(7) At the time of deducting tax from the insurance commission credited to an agent’s account, adjustment for any debits made in his account in respect of excess commission credited or paid to him earlier is not permissible and income-tax must be deducted from the full amount of commission credited to his account.
(8) It will be open to the recipient of the commission to make an application in Form No. 13D to the Income-tax Officer concerned and obtain from him a certificate authorising the person responsible for paying the income by way of insurance commission to deduct tax at such lower rates, or deduct no tax, as may be appropriate to his case.
Such certificate will be valid for the period specified therein unless it is cancelled by the ITO earlier.
(9) The person responsible for making the payments should issue a certificate in Form No. 19D showing therein the amount of income by way of insurance commission credited or paid, the amount of tax deducted at source, and the date of payment to the Government account.
(10) The person making deduction of tax in accordance with section 194D from income by way of insurance commission should send to the Income-tax Officer having jurisdiction to assess him -
(a) a certificate in Form No. 26D quarterly on 15 July, 15 October, 15 January and 15 April, in respect of deduction of tax made by him during the preceding quarter;
(b) a statement in Form No. 26E on or before June 30 each year containing details of amounts of insurance commission from which tax has been deducted by him during the immediately preceding financial year; and
(c) a statement in Form No. 26F on or before June 30 each year containing details of amounts of insurance commission paid or credited during the immediately preceding financial year without deduction of tax.Circular : No. 237 [F. No. 275/12/78-IT (B)], dated, 15-4-1978.
In a demand on an insurer for short or late payment of deduction on agents' commission for 1978-79.
Forms it names. Form No. 13D, Form No. 19D, Form No. 26D, Form No. 26E, Form No. 26F
Rules it names. Rule 27 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.