The mostly awaited budget-2024 is finally out. This budget was eagerly anticipated as it is the first budget being presented after NDA stormed to power for the third consecutive time in India. However, with BJP falling short of majority and forming the government with allies, many people expected the government to announce “freebies” and put hold on the developmental activities that were carried out in the last 2 terms. Nonetheless, the budget came as a surprise to many and disappointment to many others. Insurance industry had high hopes from this budget with expectations of reduction in GST for insurance products, increase in Section 80D limit etc. However, only 2 soaps were given to the insurance industry in this budget.
1) Reduction of TDS in Life Insurance Payout: One of the key measures announced for the insurance industry in the budget-2024 is reduction of TDS for all life insurance payouts. Tax deducted at source (TDS) was reduced from 5% to 2% for all the life insurance policy related payouts. This means that any payout from life insurance policies would have a TDS of 2% and this amendment would come into force from October 1, 2024. Earlier when the TDS was 5%, the net amount people used to get from their life insurance plans was less. With this new measure, beneficiaries of life insurance plans would now get increased payout as there’s a decrease in the TDS. This change is applicable only for life insurance payouts.
2) Reduction of TDS in Insurance Commission Payout: The other measure that was proposed in the budget-2024 for the insurance industry is to reduce the TDS on payment of insurance commission. The TDS would be reduced from 5% to 2% in the budget-2024 and this amendment would be effective from April 1, 2025. This would heavily benefit the agents as they would get more in hand as the insurance companies would now deduct 2% TDS instead of earlier 5%.
FAQs:
- Does the TDS Deduction Apply for All Tax Slabs?
Yes. The new TDS limit of 2% for life insurance payouts would be applicable for all tax slabs. However, individuals have to file their income separately at the end of the year and the tax amount would be adjusted accordingly.
- Will Insurance Agents Get More Commission With Reduction of TDS?
No. The budget-2024 doesn’t refer to any changes in the commission offered to the agents. It only mentions the Tax that would be deducted at the source (insurance company) at the time of paying the commision to the agents.
- Will These New Changes Increase the Deduction Limit in Section 80d?
No. The new measures proposed in the budget do not have any influence on the deduction limit under Section 80 D of the income tax. The section 80 D limit would remain unchanged for now.
- Will the Insurance Premiums Increase After the Budget?
No. There’s no correlation between the budget and the insurance premiums rise. Life insurance premiums are already seeing an increase of up to 20% and this trend would continue with each passing year.
