The Income Tax Department is likely to send out demand notices for taxes totalling INR250bn ($3bn) to several insurance companies.
The notices would relate to higher than allowed commissions and claimed deductions for the period before 1 April 2023, a senior government official said.
“Central Board of Direct Taxes (CBDT) is doing a reassessment of the tax paid by insurance companies in certain years before 1 April 2023. The income tax department is in the process of sending out tax notices. By March-end, all the income tax notices will be sent for a quantum of approximately INR25,000 crore,” an official told Moneycontrol.
The tax department said that commissions paid to intermediaries by insurers of amounts higher than the limit set by the Insurance Regulatory and Development Authority have been accounted for as “other expenses”. It alleged that the additional commission paid and deductions claimed were without any service having been provided. If the payment made was not an actual expenditure, insurance companies would have to pay direct tax on a higher amount of income than they had reported.
CBDT would make tax adjustments, disallow expenses and may initiate some penalty proceedings, the official said.
