1) Who is responsible to deduct tax under section 194DA of Income Tax Act, 1961?
Any person responsible for paying to a resident any sum under a life insurance policy, including the sum allocated by way of bonus on such policy, other than the amount not includible in the total income under section 10(10D), shall deduct income-tax thereon.
2) When to Deduct TDS under Section 194DA?
Tax shall be deducted at the time of payment thereof.
3) Rate of TDS under Section 194DA
The rate of tax u/s 194DA is 5% (3.75% w.e.f. 14.05.2020 to 31.03.2021) on “only Income Part” of the payment made under LIP. [Applicable from September 1, 2019] (That is after deducting the amount of insurance premiums paid by the insured person from the total sum received from Insurance Company).
In case if deductee does not provide the PAN details with the Life Insurance Companies, then there will be a TDS of 20%.
4) Threshold Limit
No deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than ₹1,00,000.
ILLUSTRATION– Mr. Sham took insurance policy on 26th July, 2015 for ₹ 2,20,000/-. He paid premium of ₹ 55,000/- every year. On 25th July, 2020 he received ₹ 2,50,000/- (including bonus) as the maturity proceeds. State whether TDS provisions are applicable or not.
Policy is taken after 1st April, 2012. Hence, amount of deduction allowed on premium should not exceed 10% of the sum assured. In this case, the sum assured was ₹ 2,20,000/- so amount of premium should not exceed ₹ 22,000/-. However actual premium paid (₹ 55,000/-) is more than ceiling limit (₹ 22,000/-). Hence, the proceeds are taxable.
As per Section 194DA, since the proceeds are more than ₹ 1,00,000/- TDS provisions are applicable. Hence the insurance company will deduct TDS @ 5% of ₹ 30,000/- i.e. ₹ 1,500/- while making the payment of the maturity proceeds.
5) Exemptions u/s 10 [10(D)]
As per sec 10 [10(D)] of the Income Tax Act any sum received under the Life Insurance Policy including the sum allocated by way of bonus on such policy is exempted whether received from Indian or a Foreign Company. However, this section has following exceptions to it:
- Any sum received under section 80DD (3) or 80DDA (3).
- Any sum received under a Keyman Insurance Policy.
- If Policy is bought after 1st April 2003 but on or before 31st March 2012: the premium paid is 20% more than the sum insured.
- If Policy is bought after 1st April 2012: the premium paid is 10% more than the sum insured.
- Life insurance policy bought for the persons with disability or person with severe disability as per section 80U or those suffering from ailments or disease as specified in section 80DDBafter 1st April 2013 if premiums are more than 15% of sum assured.
There is no maximum limit for claiming the exemption under Sec 10 [10(D)] unless the above-mentioned conditions are not fulfilled. Also, the above exceptions are not applicable on death claims or any amount received on the death of the insured.
6. When a declaration is submitted in form 15G/15H u/s 197A:
If a declaration is submitted u/s 197A by the recipient to the payer along with his/her PAN, then no tax is deductible
Points to be kept in mind
- For the purpose of calculating the actual capital sum assured, the following shall not be taken into the account:
> the value of any premiums agreed to be returned; or
> any benefit by way of bonus or otherwise, over and above the sum actually assured, which is to be or may be received under the policy by any person.
- Any amount received from the Foreign Life insurance company is also eligible for deduction.
- Keyman insurance policy means a life insurance policy taken by a person on the life of another person who is connected to the business as an employee or other capacities, either in the present or in the past.
- It may be noted that while computing the amount taxable out of the maturity proceeds, the premium paid by the assessee shall be excluded
ILLUSTRATION– Examine the taxability and applicability of TDS provisions in the following cases:
(i) Mr. Jasmeet, a resident received Rs. 7,50,000 on 30.04.2020 on maturity of her life insurance policy taken on 01.05.2007. The policy sum assured is Rs. 1,00,000 and annual premium being Rs. 22,500.
In this case, since the annual premium of Rs. 22,500 exceeds Rs. 20000, being 20% of the sum assured of Rs. 1,00,000, in respect of policy taken before 01.04.2012, the maturity proceeds of Rs. 7,50,000 received by Mr. Jasmeet on 30.04.2020 would not be exempt under section 10(10D) in his hands. Tax shall be deducted @ 5% on (Rs. 7,50,000 less premium Rs. 22,500 * 13 years = Rs.2,92,500) Rs. 4,57,500.
(ii) Miss Jasmine, a resident received Rs. 3,50,000 on 01.05.2020 on maturity of her life insurance policy taken on 10.04.2012. The policy sum assured is Rs. 50,000 and annual premium being Rs. 16,000.
In this case, the annual premium of Rs. 16,000 exceeds Rs. 5,000, being 10% of sum assured of Rs. 50,000, in respect of a policy taken on or after 01.04.2012 and consequently, the maturity proceeds of Rs. 3,50,000 received on 01.05.2020 would not be exempt under Section 10(10D) in the hands of Miss Jasmine. Tax shall be deducted @ 5% on (Rs. 3,50,000 less premium Rs. 16,000 * 8 years = Rs. 1,28,000) Rs. 2,22,000.
Extract of Section 194DA TDS on Payment in respect of Life Insurance Policy
194DA. Any person responsible for paying to a resident any sum under a life insurance policy, including the sum allocated by way of bonus on such policy, other than the amount not includible in the total income under clause (10D) of section 10, shall, at the time of payment thereof, deduct income-tax thereon at the rate of [five per cent on the amount of income comprised therein] :
Provided that no deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than one hundred thousand rupees.
(Republished with amendments)
Read Also:-
Author Bio
My wife purchased HDFC SL CREST in 2016. Now surrendered after 8 years. We both are NRIs, and have NRE account. All instalments were through NRE account. But upon receiving final payment, TDS has been deducted. Being NRI can TDS be deducted at source. If yes how it can be claimed.
If Policy is bought after 1st April 2003 but before 31st April 2012: the premium paid is 20% more than the sum insured.
Kindly correct it 31st March 2012
I have received Rs 8,30,000 as maturity amount in ULIP investment from ICICI .The Total premimum paid was Rs 5,00,000 what will be tax under section 194 DA
When TDS deducted under section 194DA whether additional tax to be paid by auditing additional income? What is the head of income? Whether Indexation benefit can be availed?.
If amount is less than rs. 100000 there is no tds under section 194DA. This amount is over and above the premium paid. In this whether the income be shown in taxable income.
YES
I have received proceeds of single premium policy ( Icici prudential ) in Nov 2020 over 10 year span and TDS under 194DA in 26AS.
Where do i show this income in online ITR 2
If, instead of maturity proceeds, one receives payment on surrender of policy, linked to the market, then, is this section 194DA applicable? Or such payments are covered by any other section of the IT Act?
I have received an amount of Rs1,76,720 towards shriram life insurance policy maturity amount for which i paid Rs 1,00,000 as an single premium in the year 2010.
For AY 2021-22, my Form 26 AS shows the in come as Rs.76720.27 and the tax dedicated as Rs.2877.01 (3.75% of Rs.76720.27) for the above payment.
For filing the IT return for the AY 2021-22, I need the following clarificaions.
1) Esther to show the in come as Rs.76720 or 1,73,843
2) Whether I need to pay any additional tax for this, over and above the tax deducted already Rs.2877.01.
3) which ITR is used to file returns as i am an employee having annual income of 19lakhs.
Thanks and Regards.
I received104556/-as maturity benefit for single premium policy with 50000/-premium. They deducted.3.75percentage for the amount after excluding 50000/-..I a tax payee and is it necessary that I should add this 54556/-as income and again pay the balance tax of 20percent
I had taken single premium policy for Rs 1.50 lac with risk cover.of 15000 under ulip plan 802.10 on 12.11.2010. Now.it has matured and i got 3.12 lac as marurity. Income tax 6200 dedudctd under 194d. Now question is whether amount of profit is exempted under 10dd
. N
I had Paid Single LIC Premium Rs. 1,10,000/- on 07/09/2011 on maturity 07/09/2021 recd. Rs. 3,70,743/- whether it is taxable or exempt u/s 10 (10D)
As per AIS it is shown as Income
I have got Survival bene for of Rs.118003.68 (after deduction of a Tax of Rs.1996.32 from Rs.120000 – 20% of the sum insured Rs.600000) from Kotak Mahindra Life Insurance Company Ltd in Jan 2021, for the policy I took in Jan 2016. I am playing a premium of Rs.75932 every year.
For AY 2021-22, my Form 26 AS shows the in come as Rs.53235 and the tax dedicated as Rs.1996.32 (3.75% of Rs.53235) for the above payment.
For filing the IT return for the AY 2021-22, I need the following clarificaions.
1) Esther to show the in come as Rs.53235 or Rs.118003.68 or Rs.120000
2) Whether I need to pay any additional tax for this, over and above the tax deducted already Rs.1996.32.
Thanks and Regards.
Please intimate the treatment on the Maturity amount received from LIC after deduction of 3.75% TDS under 194DA. Shall the entire amount or the difference is to be shown as Income in the ITR and under what head in ITR2?
I have recd proceeds of single premium policy in Jan 2021 and TDS under 194DA in 26AS.
Where do i show this income in online ITR 2
Sir
An amount of Rs.493515.00 received as maturity amount of
insurance. And Rs.18507.00 was deducted under section 194da(as per 26as). Sir how much amount is taxable and where I show in itr for ay 21-22.
Please intimate the treatment on the Maturity amount received from LIC after deduction of 5% TDS under 194DA. Shall the entire amount or the difference is to be shown as Income in the ITR and under what head?
I have received rs 93 lakhs from life insurance policy and rs 5 lakhs is deducted as it is keyman policy what amount should I show in income tax return also previously I have paid tax at time of assignment on surrender value of this policy again I have to pay tax for this policy?
I have recd. a sum of 103378.37 minus on 09/03/2021 as 20 % survival benefit on the sum assured amt. of 530000. An amount of Rs.69990 is shown in in my 26AS statement as amt. paid and Rs.2621.63 as TDS. Pl. let me know how to show the above amt. in my ITR.
If TDS is already deducted,then need be to pay any income tax on rest received amount or no in the same financial year.pls clear.
I had received rs102299and116620 from Lic on maturity . My traces shows for a credit of 57400 an amount of 2153 shown as deducted . Pl clarify whether the amount shown as credited is not actually credited and whether the same to be shown as income to be added for assessment.
Regards
DhileepkumarTS
Please intimate the treatment on the Maturity amount received from LIC after deduction of 5% TDS under 194DA. Shall the entire amount or the difference is to be shown as Income in the ITR.
Please intimate the treatment on the Maturity amount received from LIC after deduction of 5% TDS under 194DA. Shall the entire amount or the difference is to be shown as Income in the ITR and under what head?
PL REPLY