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.
TDS Return
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 | Due date |
| April-June | 31st July |
| July-September | 31st October |
| October- December | 31st January |
| January- March | 31st May |
TDS Certificate
The Deductor or payer shall issue a quarterly TDS certificate to the deductee in form 16A. The deductor can download the form from the Traces and the deductee can see the same in their form 26AS.
FAQs
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.
5 percent TDS has been deducted from the gain amount. Now the amount received has to be reflected in total income or not.
Yes, If TDS has been deducted from the gain amount then the amount will be taxable under Income from other sources.
Further, if the amount received on maturity is not taxable subject to the condition it will be shown as Exempt income.
is total amount is taxable or only gain part is taxable
Hi Ram,
As per section 194DA, the total amount received on maturity, including any bonus or interest is subject to TDS @5% if the total amount exceeds INR 1 lakh. However, only the gain or profit portion of the maturity is taxable under the Income Tax Act. The taxable amount is the difference between the total amount received on maturity and premiums paid towards the policy.
Hope this helps.
Suppose the difference between Purchase Price of LIC’s Bima Bachat purchased after 1st April 2013 and the total amount received including Purchase Price after nine years comes to Rs.205000 is this difference amount is treated as ‘Gain’ and fully taxable? Already TDS was effected @ 5% on this Gain amount of Rs.205000. Need one show the entire amount of Rs.205000 as Income and pay tax on it?
Father has taken policy. Daughter is beneficiary and get the maturity amount after deduction of TDS. Daughter does not have anyu other income. Whether daughter has to claim income and take refund or clubbing provisions will be applicable and father has to shown income in his return and take credit of TDS.
Can we take indexation benefit on gain from ULIP surrender while filing return. 5% TDS was deducted before payout.
Received matured amount from HDFC life and 5% TDS deducted on the same under 194 DA. Is the excess of premium received is taxable or not. If any special concession for senior citizen.
ULIP BASED LIFE INSURANCE POLICY ON MATURITY PAYS LESS THEN PREMIUM PAID HOW AND UNDER WHICH SECTION OF ITR LOSS HAS TO BE REFLECTED?
5% TDS has been deducted from the gain amount. Now in ITR if that amount is chargeable under normal rate or special rate.
Hi, I have received 61500 after deducting 3000 odd amount as TDS under section 194D from LIC Beema Bachat. Sum assured was 150000.
Should I include 61500 as other income while filing my IT return. Both these amounts are reflecting under AIS and 26AS under my name.
Kindly advise.
Where I show taxable amount of 194DA in itr1?
If a person received money back of 15% (Rs. 60,000) in the financial year 2016-17, and same amount in the financial year 2019-20 and maturity amount of Rs. 344000/- in the financial year 2022-23 from lic’s Bima Bacahat policy of one time premium of Rs. 2,90,000/-more Or less paid in the financial year 2013-14 then during maturity in the financial year 2022-23 how much tds should be deducted by LIC while paying the maturity amount in the year 2022-23 and what should be tax liability of the individual while filing return in the assessment year 2023-24? Kindly let me know.
Hi Ram,
If I have received 1,50,000 under maturity proceeds and my initial premium of the same comprises of 1,00,000, the net 50,000 is taxable. Now the insurer has deducted a tax @ 5% on 50,000 i.e. 2500. How are we suppose to declare these 50,000 insurance proceeds in ITR i.e. as a Exempt income u/s 10(10D) or under Income from Other sources.
Because if we declare the same as Income from other sources, the tax liabilty is calculated as per the tax slab applicable on the total income and not @ 5% as per Sec 194DA ?
How will be the income tax calculated for the Guaranteed Income plans like LIC Jeevan Umang & HDFC Sanchay Plus for premiums above 5 lacs taken after 1sy April 2023?
I purchased LIC Bima Bachat policy on 27.12.2013 paying single premium 1347994 and sum assured 1780000 for 9 years. I got first SB 267000 minus 2670 as 1% TDS on 27.12.2016. I got on 27.12.2019 the second SB 267000 without any tax since IT rules changed (as per LIC). But on maturity of policy on 27.12.2022 LIC charged 5% TDS 23140 on 462800 (the second SB + loyalty addition 195800) without informing me and did not give form 16A too. My query now is whether the tax is applicable retrospectively or prospectively and whether LIC can club earlier payouts with the future ones for taxation. If 194DA were effctive from April 2014 then how its rate varied in 2016, 2019 and 2022. How should I reflect thee items in my ITR this year?
what is the effective date of 194 DA after which all the pay outs of a money back policy not exempted u/s 10(10d), has to be calculated along with the maturity benefit for TDS deduction when the maturity benefit including pay outs , bonus, interest etc.is more than 1 Lac.
5 per cent TDS have been deducted from maturity amount of HDFC SL ProGrowth Flexi. Will the amount is taxable or exempt from tax or if taxable then which amount is taxable.
Yes, the difference between maturity amount received and premium paid shall be taxable.
क्या सेक्शन 194 DA के तहत केवल इनकम पार्ट यानि की बोनस एक लाख से ज्यादा होने की दशा में टेक्स कटोती की जावेगी या कुल भुगतान राशी एक लाख से ज्यादा होने पर भी टेक्स कटोती की जायेगी ?
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