Deduction of income-tax at source-Section 194D of the Income-tax Act, 1961-Deduction from insurance commission, etc.-Rate of tax applicable during the financial year 1986-87 - Income Tax - 462/1986

Deduction of income-tax at source-Section 194D of the Income-tax Act, 1961-Deduction from insurance commission, etc.-Rate of tax applicable during the financial year 1986-87 Circular No.462 Dated 10/7/1986 From B. Nagarajan, Secretary, Central Board of Direct Taxes. To All Insurance Companies. Sir, Subject: Deduction of income-tax at source-Section 194D of the Income-tax Act, 1961-Deduction from insurance commission, etc.-Rate of tax applicable during the financial year 1986-87. I am directed to invite a reference to this Department's Circular No. 426 [F. No. 275/32/85-IT(B), dated 24-7-1985 [printed at [1985] 155 ITR (St.) 47 and Part I, Volume 23, Sec. IV, Taxman-October, 1985, pages 75-77], wherein the rates at which the deduction of income-tax was to be made during the financial year 1985-86 from payments of income by way of insurance commission under section 194D of the Income-tax Act, 1961, were intimated. The Finance Act, 1986, prescribes in Part II of the First Schedule, the following rates for deduction of tax at source under section 194D of the Income-tax Act during the financial year 1986-87: Income-tax I. In the case of a person (other than a company) who is resident in India 10 per cent; II. In the case of a domestic company 21.5 per cent; Though the provisions of section 194D of the Income-tax Act, 1961, apply only in relation to income by way of insurance commission paid to a resident, under the provisions of section 195 of the Income-tax Act, income-tax is required to be deducted from payments (including payment of income by way of insurance commission) made to a non-corporate non-resident taxpayer as also a company which is neither an Indian company nor a company which has made the prescribed arrangements for declaration and payments within India of dividends in the manner prescribed under rule 27 of the Income-tax Rules, 1962. In the case of a person other than a company, who is not a resident in India, the rate of deduction of tax at source as specified in 1(b)(i) of Part II of the First Schedule to the Finance Act, 1986, is income-tax at 30% of the income by way of insurance commission or income-tax in respect of the income at the rates prescribed in Sub-paragraph I of Paragraph A of Part III of the said Schedule (Extracts given in Annexure), 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 on insurance commission is to be deducted at the rate of 65%. There is no change in the substance of the main provisions in law in so far as they relate to deduction of income-tax from insurance commission, as given in paragraph 3 of the aforesaid circular. 2. The contents of this circular may please be brought to the notice of all concerned. In case of doubt, the Income-tax Officer may be consulted. Copies of the circular will be available with the Director of Inspection (IRS PR), 6th Floor, Mayur Bhawan, Connaught Circus, New Delhi-110 001. Yours faithfully, (Sd.) B. Nagarajan, Secretary, Central Board of Direct Taxes.