Section 194DA- TDS on maturity payment in respect of Life Insurance Policy

TDS needs to be deducted on maturity payment in respect of life insurance policy.

1. Time of Deduction- TDS to be deducted at the time of payment.
2. Deductor- Any person who makes a payment should deduct TDS
3. Deductee- The payment of interest should be made to a resident. If payment is made to a non-resident, TDS shall be deducted under section 195.
4. Tax Rate- TDS at a rate of 5% shall be applicable if the aggregate amount exceeds more than Rs.1,00,000 in one FY.

If PAN is not furnished, then tax to be deducted at a higher rate.

5. Example: For example, consider Mr Venkat received a maturity amount of Rs 7.5 lakh from his life insurance policy. Mr Venkat has paid an amount of Rs 2.5 lakh as a premium for the policy over a period of 10 years.

In this case, the maturity amount is above Rs 1 lakh. Hence, the maturity proceeds will be paid after deducting 5% TDS on Rs. 5 lakh). After deduction, Mr V will receive Rs. 7,25,000.

6. Cases when TDS shall not be deducted-
   • If TDS on amount exempt under Section 10(10D)
   • If declaration is given under Sec 197A
7. Sec 10 (10D): According to section 10 (10D), any sum received under the LIC policy including the amount of bonus is exempted. This section has following exemptions to it:
   • Any amount received under section 80DD (3) or 80DDA (3).
   • Any amount received under keyman insurance policy.
   • LIC policy is bought after 1st April 2003 but before 31st March 2012 and premium is more than 20% of the sum assured.
   • LIC policy is bought after 1st April 2012 and the premium paid is more than 10% of sum assured.
   • LIC policies bought for persons with disability or severe disability according to section 80U, or for individuals suffering from ailments covered under section 80DDB after 1st April 2013, and the premiums are more than 15% of sum assured.
   • There is no ceiling limit for claiming exemption under section 10(10D) unless above mentioned conditions are satisfied.

˜Authored by – CA Anushka Saraogi˜

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