Mumbai: The Union Budget 2024-25 has proposed to reduce the tax deducted at source (TDS) on payment of bonus or maturity proceeds in life insurance policies and on commissions paid to insurance agents (by insurers) from 5 per cent to 2 per cent.
The proposal to reduce TDS on life insurance policy cover, including on the sum by way of bonus, by amending Section 194DA of the Income tax Act will come into force from October 1, 2024 while amendment to Section 194D, pertaining to TDS on payment of insurance commission will take effect from April 2025.
The budget also announced that there will be simplification of the rules and regulations pertaining to FDI, which will be keenly awaited by foreign investors in the insurance sector. In a significant move, the Budget reiterated the GST Council’s views that the activity of apportionment of co-insurance premiums by the lead insurer to the co-insurers in the co-insurance agreement and the services by insurers to reinsurers in respect of ceding/re-insurance commission will, subject to certain conditions, be treated neither as a supply of goods nor as a supply of services. Shailaja Lall, Partner, Insurance & Reinsurance, Shardul Amarchand Mangaldas & Co. – Insurance said, “This issue was the bone of contention between GST authorities and insurers for the past few years and is a welcome clarification for the insurance sector, as the heavy burden of potential GST payments for such arrangements will now be lifted.”
