Punjab insurance brokers stumped by TDS rules

Insurance brokers in the Punjab region are upset at there being "no clarity on taxation issues like tax deducted at source and service tax".

According to them, some companies are deducting tax at source at varying rates and the same is the case with service tax. The problem lies with both private and public sector insurance companies.

It was only in 2003 that the Insurance Regulatory and Development Authority (Irda) started issuing licences to insurance brokers.

As per the rules, an agent can represent only one life insurer and one non-life insurer. Insurance brokers can represent a number of insurance companies.

"As for service tax, when we book business from a client, he pays the premium and service tax to us, which is deposited with the insurance company. This amount is to be paid to the exchequer, but the procedure is not systematically followed. There is no uniformity of rates among the insurers as well as among their divisional offices. They are deducting tax at different rates. Some companies do not even issues TDS certificates," said P N Bhat, CEO, Berkeley Insurance Services Ltd, Chandigarh.

Insurance Brokers Association of India Secretary V Sithapathy said, "When we raise a brokerage bill along with service tax, it should be honoured. Instead, the insurance companies insist there should be two separate bills. In this situation, we have to follow up with them again and again, even though it could be done simultaneously. In some cases, it is not paid."

Bajaj Allianz General Insurance Area Manager (Chandigarh) Atul Mehta says the problem occurs when the payment of service tax is not done centrally. "As far as our company is concerned, we handle these issues centrally in Pune. In some companies, accounting procedures are not established and hence the problem occurs."

"The concept of service tax in respect of insurance premium and insurance brokers' fees needs to be revisited because they do not strictly fall under the services rendered category because our service continues even beyond the premium and brokerage fees. We feel that there should not be any service tax in this case. As for TDS, there is no uniformity in the interpretation of law," Sithapathy added.

Embee Insurance Brokers Managing Director S K Jain said, "After de-tariffing, insurance companies will get about 80 per cent of their business from the insurance brokers. We are hopeful that there is clarity on such issues. The problem does not occur with all the companies. However, we have discussed the issues with the insurance companies and believe they will be sorted out very soon."