Page 43 - The Insurance Times August 2024

FEATURE

Budget 2024: Budget slashes TDS on life

cover pay-outs, insurance commission

U nion Budget 2024-25 proposes to slash the rate The Budget has proposed an amendment providing any

expenditure not admissible under the provisions of Section
at which tax will be deducted at source (TDS) on
life insurance policy pay-outs, to policyholders,
37 in computing profits and gains to be included to profits
and insurance commission payable, to agents,
from 5% to 2%. and gains of the life insurance business. The amendment will
take effect from April 1, 2025 and accordingly apply from
assessment year 2025-2026 onwards.
The proposal to reduce TDS on life insurance policy cover,
including on the sum by way of bonus, by amending Section Welcoming the Budget proposals aimed at enhancing
194DA of the Income tax Act will come into force from employment, skill development, MSMEs and the welfare of
October 1, 2024, Budget documents accompanying Finance the middle class, MD and CEO of IndiaFirst Life Rushabh
Minister Nirmala Sitharaman’s said. Gandhi said “the introduction of a clause pertaining to non-
deductible expenses in Section 37 for life insurance
Likewise, the Budget has proposed amendment to Section companies may lead to tax litigation.”
194D, pertaining to TDS on payment of insurance
commission. “Any person responsible for paying to a resident Likewise, he said the Budget proposal to increase Capital
any income by way of remuneration or reward, whether by Gains Tax is expected to impact tax liabilities for ULIP
way of commission or otherwise, for soliciting or procuring policyholders. However, ULIP holders purchasing policies
insurance business (including business relating to the with premium of less than Rs. 2.5 lakh per annum can
continuance, renewal or revival of policies of insurance),” continue to avail benefits under Section 10 (10D) and are
will deduct TDS at the rate of 2%. The amendment will take not liable to pay any tax on maturity.
effect from April 2025, according to the documents.
He welcomed the reduction in TDS from 5% to 2% on policy
For the insurance sector, Budget proposals were a mixed payouts. It is expected to boost customers’ liquidity.
bag with the Finance Minister also announcing a measure
to preventing misuse of deductions of expenses claimed by PB Fintech Joint Group CEO Sarbvir Singh said the initiatives
life insurers. announced in the Union Budget portray a bright future for
a ‘Viksit Bharat’ and reflect a forward-thinking approach
The proposal comes amid instances where non-business that will pave the way for a more prosperous and inclusive
expenses have been claimed by life insurance companies. India.

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