Understanding Section 194DA: TDS on life insurance payouts
A short, clear guide to TDS on life insurance payouts under Section 194DA, covering who it applies to, TDS rates, limits, exemptions, how income is calculated, and compliance steps, with a quick example.
TDS on life insurance policy payouts: simple guide (Section 194DA)
TDS on life insurance policy payouts: simple guide
Section 194DA explains TDS on life insurance payouts. Here is what matters.
Applicability
- Payouts covered: Applies to life insurance payouts like maturity benefits.
- Not covered: Policies that are exempt under Section 10(10D).
TDS rate
- Until September 30, 2024: 5% on the income part of the payout.
- From October 1, 2024: 2% on the income part of the payout.
Threshold
- Limit: TDS applies only if the payout is more than ₹1,00,000 in a year.
Exemptions
- Section 10(10D): Policies under this section are exempt.
- Death benefit: Fully exempt from TDS.
- Small payouts: Payouts below ₹1,00,000 in a year are not subject to TDS.
How income is calculated
- Formula: Income = Payout − Total premiums paid.
- Example: Payout ₹10,00,000 − Premiums ₹7,00,000 = Income ₹3,00,000 → TDS @ 2% = ₹6,000.
Compliance
- Insurer duty: Insurance companies must deduct TDS and deposit it with the government within 30 days from the end of the month.
- Your tax return: You can claim TDS credit when you file your income tax return.
Quick takeaway
Key point: If your payout is taxable and above ₹1,00,000, TDS is taken only on the income part, not the full amount.
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Krishna Gopal Varshney
An editor at apnokacaKrishna Gopal Varshney, Founder & CEO of Myitronline Global Services Private Limited at Delhi. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. Visit our website for latest Business News and IT Updates.
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Krishna Gopal Varshney
An editor at Myitronline
Krishna Gopal Varshney, Founder & CEO of Myitronline Global Services Private Limited at Delhi. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. Visit our website for latest Business News and IT Updates.
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