Insurance companies in India staring at Rs 25,000-cr tax bombshell

Several insurance companies in India are reportedly staring at tax notices to the tune of Rs 25,000 crore by next month. 

The Central Board of Direct Taxes (CBDT), according to a Moneycontrol report, is probing the insurance firms for evasion. The companies have paid higher commissions and claimed deductions for the period before April 1, 2023, the report added.

The report quoting CBDT officials claims extra commission was paid to agents and intermediaries over and above the limit set by the Insurance Regulatory and Development Authority of India (IRDAI) under "the garb of some other expenses".

The insurance regulator had last year lifted the capping limits on commissions paid to agents to ensure transparency in the insurance sector.

The additional commission was paid and deductions were claimed without any service being provided, the tax department has claimed. 

Last year, life and general insurance majors such as Bajaj Allianz, Aditya Birla Sun Life Insurance, and HDFC Life Insurance were slapped with show cause notices for alleged evasion of GST of ₹2,400 crore.