Income Tax Notice to Insurance Companies: Some insurance companies are going to get a big blow. The Income Tax Department is preparing to send them a notice of Rs 25 thousand crore. This demand notice will be sent to those insurance companies who have paid high commission and claimed deduction for the period before April 1, 2023. Learn about the case in detail
Income Tax Notice to Insurance Companies: Some insurance companies are going to get a big blow. The Income Tax Department is preparing to send them a notice of Rs 25 thousand crore. This demand notice will be sent to those insurance companies who have paid high commission and claimed deduction for the period before April 1, 2023. According to the information received by Moneycontrol, the Central Board of Direct Taxes (CBDT) is re-assessing the amount of tax paid by insurance companies in the few years before April 1, 2023. The Income Tax Department is in the process of sending tax notices. All notices will be sent by the end of March next month.
What is the whole matter
This entire controversy is related to extra commission. The Income Tax Department says that agents and intermediaries were given commission more than the limit set by the Insurance Regulatory and Development Authority of India (IRDAI). Tax officials are investigating whether insurance companies have distributed extra commission under the guise of some other expenses. CBDT is investigating insurance companies in case of tax evasion.
The Income Tax Department claims that extra commission was distributed without any service and deduction was claimed. CBDT is investigating which commission has been given without any service and then insurance companies will be asked to pay tax on it. Apart from this, penalty proceedings can also be initiated. IRDAI removed the capping limit on commission paid to agents from April 1, 2023, to ensure transparency in the insurance sector.
What is being investigated?
According to what the source told Moneycontrol, the investigation is being done because deduction was allowed on something which should be shown as income. If a company claims it as an expense on advertisements, it is a cost, while commission is income. Insurance companies have been accused of accounting fraud. A company cannot book income as expense and claim deduction.
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