Budget 2010 has brought a smile to the more than 10 lakh insurance agents who earn a living from commissions on insurance policies.
With the income limit for deducting tax at source (TDS) raised from Rs 5,000 to Rs 20,000, not only agents but also insurance companies are likely to benefit from lower compliance costs.
There are roughly 30 lakh life insurance agents in the country, of which 15 lakh represent Life Insurance Corporation of India (LIC) while the remaining work for private insurers. General insurance companies have another two lakh agents.
A senior official of Life Insurance Corporation of India said, “There are five lakh agents appointed by LIC in the last three years who earn an annual commission of less than Rs 20,000 and will be benefited by the move. For private insurers the number of agents could be higher — around seven lakh.”
S.B. Mathur, secretary general, Life Insurance Council (an association of life insurers) said, “Since the income levels have gone up, the tax exemption limits had to be revised. The budget says that those agents who have a total annual earning of Rs 20,000 and more will pay TDS. There are many agents who will benefit.”
V. Srinivasan, chief financial officer of Bharti Axa Life Insurance, said, “Earlier insurance companies had to deduct tax at source in case an agent’s commission was more than Rs 5,000. Now companies will deduct tax only if it is Rs 20,000 or more. Insurers will save a lot on compliance cost.”
S.L. Mohan, secretary general, General Insurance Council, said, “General insurance agents earn a lower commission compared to life insurance agents as the ticket size and the commission rates for health and motor policies are low compared to those for life insurance policies. So, a significant number of non-life agents will benefit.”