prpri What to do if TDS u/s 194DA has been deducted and shown in 26AS What to do if TDS u/s 194DA has been deducted and shown in 26AS

There is general perception among people that amount received on maturity of life insurance is exempt from income tax. However the same is not true.

Receipt from life insurance may occasion on 2 events:

1. On death of the person insured (Death proceeds)

2. On maturity of the policy in the normal course (maturity proceeds)

In the case of death proceeds (i.e amount paid to nominee on death of insured person) the whole amount is exempted from tax u/s 10(10D).

However in case of maturity proceeds (i.e amount paid in case other than death) the exemption u/s 10(10D) will be available as below:

Policy issued between Type of Insured person % of premium w.r.t sum assured Taxability TDS u/s 194DA
Prior to 01.04.2003 Any Any Fully Exempt u/s 10(10D) Not Applicable
01.04.2003 to 31.03.2012 Any <=20% Fully Exempt u/s 10(10D)
>20% Net Return = (Maturity proceeds – Investment) will be fully taxable
On or after 01.04.2012 Any <=10% Fully Exempt u/s 10(10D)
>10% Net Return = (Maturity proceeds – Investment) will be fully taxable
On or after 01.04.2013 Normal Person <=10% Fully Exempt u/s 10(10D) No TDS if total payment < Rs 1,00,000

TDS Rate:
01.10.14 to 31.03.16 – 2%
01.04.16 to 31.08.19- 1%
w.e.f 01.09.19 – 5%

>10% Net Return = (Maturity proceeds – Investment) will be fully taxable
Person suffering from disability or disease covered u/s 80U or 80DDB <=15% Fully Exempt u/s 10(10D)
>15% Net Return = (Maturity proceeds – Investment) will be fully taxable

For Example– Say Mr X has taken a life insurance policy of sum assured Rs 2.50 lacs for 5 years on 01.07.2013 and paying an annual premium of Rs 50,000 (i.e more than 10% of sum assured).

He received a gross sum of Rs 2.80 lacs on maturity (i.e 30.06.2018) and insurance company has deducted TDS @ 1% on 2.80 Lacs i.e Rs 2800 which has got reflected in 26AS of FY 2018-19 of Mr X .

In such a situation the proceeds from life insurance will not be exempt from tax since premium paid is > 10% (assuming Mr X is not suffering from disability or disease u/s 80U or 80DDB).

Mr X should offer income of Rs 30,000 (i.e Rs 2.80 lacs – 2.50 Lacs) as Income from other sources which will be taxable at slab rate.

He need to claim TDS of Rs 2800.

Depending upon his slab rate of tax, net tax either to be paid or will be refunded.

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  1. Surender Singh says:

    Name – Surender Singh Rathore
    Policy no. 14558889 ICICI Pru
    Commencement date – 07.10.2010 Maturity date – 07.10.2020
    Term – 10 yrs. Periodicity of payment – Single
    Premium – Rs. 100000.00 Sum Assured – Rs. 125000.00
    Maturity Amount – Rs. 196629.00 T.D.S. – Rs. 3624.00
    My Question – Whether maturity amount will be Taxable in current F.Y. , if Yes than on what amount ?

  2. Harsh says:

    What if when the premium amount is less than 10% of the sum assured.. According to the provision amount received at the time of surrender/maturity is exempt, but in my case this amount shown in 26AS is that mean teh whole amount is taxable in ITR Or we can say that it is the possibility of wrongly tax deducted by LIC

  3. Harsh says:

    What if we surrender the policy and receive 2,30,000 but already paid premium amounted 2,50,000 that will be higher than the amount received.. Can we show the negative 20,000 in the ITR under the head other sources

  4. Anil says:

    I paid Rs 5,09,032 as single premium for LIC policy with some assured Rs 7,00,000 (Policy term 9 years). Got back Rs 105000 at the end of 3rd and 6th year with TDS @1% and reflected the whole amount of Rs 105000 and TDS in my 26AS by LIC. What amount is to be reflected in my ITR and how to treat the Tax?

  5. Brij Bhushan Mahajan says:

    ULpolicy was prefred in 2014 with annual premium of Rs 99990 with lock in period of three year .after completion of five year .on sixthyear a got 5.83 with tds @ 1% .my quarry is whole amount is taxable or proceed- principal.

  6. Vikash says:

    In your example, if Mr. X received Rs. 230000.00 on maturity and TDS deducted @1% Rs. 2300.00. Then how can get refund of this amount of TDS and where to show this loss of Rs. 20000.00 in ITR.

  7. CA Sumant says:

    Dear Srikant,
    Section 10(10D) start with the words “Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy” Meaning thereby total payment i.e. sum assured as well as bonus should be treated as Income.

    Any other opinions with extra analysis are welcome.

  8. KIRAN says:

    If the policy is ULIP and being it market linked(thus capital asset), if we receive fund value, can we take and deduct indexed cost of acquisition and disclose it under Capital Gain Head of income?

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August 2021