As per Section 194DA of the Income Tax Act, any payment made to a citizen upon the maturity of their life insurance plan must be tax deductible at the time of payment. However, the amount paid must not include any of the income types listed in Section 10D. In addition to this, Section 194DA also explains how to calculate, exempt, and collect TDS on revenue collected from life insurance policies.

Rate of TDS under Section 194DA

Below is the table containing the TDS details about the Section 194DA TDS.

Type

Applicable rate of TDS

Income obtained through insurance companies

5%

Domestic Organisations

10%

Any instance without PAN details

20%

Eligibility Criteria for Claiming Deduction under Section 194DA

Here are the eligibility details to claim a deduction under Section 194DA of the Income Tax Act.

  • Any value from a foreign life insurance company is eligible for the deduction.

  • If you can deliver Form 15G/15H as confirmation that you are not eligible for taxes on your overall revenue, you can claim a deduction.

  • According to Section 10 (10 D), the profits earned on the maturity of an insurance policy are tax-free if the sum assured is at least ten times the annual premium.

  • Money received by the beneficiary after the policyholder's death is also tax-free.

 

Additionally, Section 194DA requires anyone who pays an Indian resident compensation for anything linked to the insurance business to deduct tax.

Issue of TDS Certificate

All individuals who take care of deductions have to make sure that they issue TDS certificates before the due date with the exception of salary deductions.

 

The timeline for TDS certificates issued for Insurance commissions is as below.

1. For Non-Government Deductions:

Certificate Period

Certificate Deadline

From April to June

By July 30th 

From July to September 

By October 30th 

From October to December

By January 30th 

From January to March

By May 30th 

2. For Government Deductions:

Certificate Period

Certificate Deadline

From April to June

By August 15th 

From July to September 

By November 15th 

From October to December

By February 15th 

From January to March

By May 30th

TDS Time Limits and Deadlines

If the deduction is by or on behalf of the government,then the deposit of such a deduction has to happen on the same day. In other situations, depositions of TDS can happen within a week of the month end in which the deduction has been made. In case the deduction takes place on the 31st of March which is the end of the financial year, then the deposition has to happen within two months of the new fiscal year. Moreover, the officer who takes care of the assessment has the option to process the deductions quarterly.

Deductions under Section 194DA 

  • A commissioned employee is qualified for no or a reduced TDS subtraction under Section 197. However, you must submit your PAN details, and if you fail to provide the details, you will not be eligible for a no-or-lower tax deduction.

  • If the total paid or credited value does not exceed the amount of Rs. 1 Lakh, no TDS deduction is allowed.

  • You can also submit a request for a lower tax rate or even a tax exemption using Form 13. Furthermore, you must obtain a Certificate of Acceptance from the Assessment Officer following successful approval.

Exemption under Section 194DA

U/s 10(10D), the exemptions on the amount that is received for a life insurance policy: 

  • If the policyholder gets the sum covered u/s 80DDA(3) and 80DD(3)

  • If the policy is issued anytime between 1st April,2003 and 31st March.2012 and the premium amount is lesser than 20% of the sum insured.

  • If the policy is issued on or before 1st April,2012 and the premium amount is lesser than 10% of the sum insured.

  • If the policy is issued on or after 1st April,2012 and the individual has a disability that is mentioned u/s 80DDB and 80U and the premium amount is lesser than 15% of the sum insured.

  • In case the amount received goes against Keyaman policy.

 

Kindly keep in mind that these exemptions do not apply in case the individual gets the sum after the policyholder’s demise.

 

Sec 194DA deals with TDS applicable on the amount that has to be paid to a resident upon the maturity of a life insurance policy, including bonuses. You should be aware of the TDS deduction that applies to your maturity amount because it will give you a clear picture of the total value you will receive when the policy matures.

FAQs

How much TDS will be applicable if I do not provide the PAN details?

Under Section 194DA of the Income Tax Act, the applicable TDS rate is 20% if you fail to give your PAN details.

Can I file for a refund after the TDS deduction?

Yes, you may submit the refund claim request by submitting the income return details. 

Is TDS applicable on premiums paid to the insurance company?

No, TDS applies to the maturity amount you will receive from the corporation.

 

When was Section 194DA established?

The section was introduced in 2014.



Who has to deduct TDS during an insurance payout?

The individual who is making the payment to the policyholder has to deduct TDS while they are making the payment. These payments can either be remuneration, commission or reward of any kind.

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