Section 194DA — the law in short
What the courts have decided on section 194DA, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Statutory position — s.194DA: payment under a life insurance policy, and the date the base changed from the gross sum to the income component
CBDT Circulars & InstructionsCuts both ways
My insurer deducted tax on the whole maturity amount, not on the gain. Was that right, and from what date is s.194DA computed on the income component only?
The base changed on 1 SEPTEMBER 2019. Until then s.194DA required deduction on the sum paid — two per cent of the sum from 1 October 2014, then one per cent of the sum from 1 June 2016 — with nothing in the text confining it to the gain. From 1 September 2019 the words 'five per cent on the amount of income comprised therein' were substituted for 'one per cent' by Act No. 23 of 2019, and the base has been the income component ever since; the rate then came down from five per cent to two per cent by Act No. 15 of 2024 with effect from 1 October 2024, so the section now requires two per cent on the amount of income comprised in the payment.
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Statutory position — s.194D: insurance commission, the threshold, and why the section states no rate
CBDT Circulars & InstructionsCuts both ways
The insurer deducted tax on my agency commission even though it was under twenty thousand rupees for the year. What is the s.194D threshold, and which year does my case fall in?
Section 194D obliges any person paying a resident 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 policies of insurance — to deduct at the rates in force, at credit or payment, whichever is earlier. The second proviso stops deduction where the amount of such income, or the aggregate of the amounts credited or paid or LIKELY to be credited or paid during the financial year to the payee, does not exceed twenty thousand rupees as the section now stands; the editions as amended up to 2020 and up to 2023 print fifteen thousand rupees, and those as amended up to 2012 and up to 2014 print twenty thousand rupees, substituted for five thousand by the Finance Act, 2010 with effect from 1 July 2010.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
