Most people in India buy an Insurance product to secure their future from insurers like LIC. However, people do not know that on the receipt of payment of a Life insurance policy including the bonus amount on maturity exceeds INR 1,00,000, then TDS is applicable to them under section 194DA.
Who shall deduct TDS u/s 194DA?
LIC or any other service provider making any payment in respect of a life insurance policy to a resident Indian then they are liable to deduct TDS if the payment exceeds the specified limit.
When to Deduct TDS u/s 194DA?
If the maturity amount ( including the bonus amount) exceeds the aggregate limit of INR 1,00,000 during the financial year then the payer is liable to deduct TDS under Section 194DA.
Rate of TDS u/s 194DA
The payer is liable to deduct TDS at 5% only on the Income part of the Life Insurance policy i.e. the amount which the payee will receive on maturity after deducting the premium paid.
Example: If Mr. Akash has received an amount of INR 10,00,000 on the maturity of the policy and he has paid a premium of INR 3,00,000 on such policy. Then the payer is liable to deduct TDS only on the Net part of Income i.e. INR 7,00,000. In this case, the payer will deduct a TDS of INR 35,000 ( 5% on INR 7,00,000).
Exemptions under Section 194DA
- Any amount received under section 80DD(3) or 80DDA(3)
- LIC policy is bought after 1st April 2003 but on or before 31st March 2012 and the premium paid is not more than 20% of the sum assured.
- LIC policy is bought on or after 1st April 2012 and the premium paid is not more than 10% of the sum assured.
- If the policy is issued on or after 1st April 2013 and the premium paid is not more than 15% of the sum assured. It applies only in case of also such a person suffers from a disability as per Section 80U & 80DDB.
If any tax is deducted under section 194DA, then the deductor shall file quarterly returns in Form 26Q. The due dates for the respective quarter are:
|TDS Return for the Quarter
Yes, if the Non-residents receive the maturity amount then they will also receive the amount after the TDS deduction but they come under Section 195 of the Income tax act.
No, the amount received by the nominee in the case of the death of the policyholder is exempted from Income tax.
If the person has received the amount under the Keyman insurance policy then the amount will be taxable.
No, only if the aggregate premium of the LIP exceeds INR 5,00,000, then only the maturity amount will be taxable.