Section 194DA - TDS on payment in respect of Life Insurance Policy - Income Tax - Ready Reckoner - Income Tax

Section 194DA :- TDS ON PAYMENT IN RESPECT OF LIFE INSURANCE POLICY Section 194DA was inserted with effect from 01.10.2014. Under this section any person responsible for paying to a resident any sum under a life insurance policy (including Bouns) shall deduct income-tax thereon, in the case. When TDS U/s 194DA is applicable - Any person responsible for paying to a resident any sum under a life insurance policy, including the sum allocated by way of bonus on such policy, shall, at the time of payment thereof, deduct income-tax thereon. Consequently, In the following cases TDS provisions of section 194DA are applicable [ in these cases, exemption under section 10(10D) is not available ] any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than- (a) any sum received under section 80DD(3) or section 80DDA(3); or (b) any sum received under a Keyman insurance policy; or (c) any sum received under an insurance policy issued on or after the 1st day of April, 2003, but on or before the 31st day of March, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds 20% of the actual capital sum assured; or (d) any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds 10% of the actual capital sum assured; (e) Any payment under life insurance policy issued after 31.03.2013, to a person covered u/s 80U or 80DDB where annual insurance premium is more than 15% of Capital sum assured (f) any payment under unit -linked insurance plan (ULIP policy) issued on or after 01.02.2021 if insurance premium payable any previous year during the term of such policy exceeds ₹ 2,50,000/- (g) any payment under life insurance policy issued after 31.03.2023 where annual insurance premium exceeds ₹ 5,00,000/- Exception - in case covered (c) to (g), tax is deductible if the payment is made on the death of a person. Rate of TDS In the aforesaid cases, tax is deductible u/s 194DA at the rate given below 2 % of payment (applicable during 01.10.2014 to 31.05.2016) 1% of payment (applicable during 01.06.2016 to 31.08.2019) 5% of payment (applicable from 01.09.2019 to 13.05.2020) 3.75% amount of income comprised in payment (applicable from 14.05.2020 to 31.03.2021) 5%. [ After April 1, 2021 Upto 30.09.2024 ] 2% [ Substituted vide Finance (No. 2) Act, 2024 w.e.f. 01.10.2024 ] Threshold Limit No TDS where amount does not exceed 1,00,000 during the financial year. Loan on Insurance Policy TDS provisions of section 194DA are applicable whether payment is made at the time of maturity or otherwises. TDS provisions of section 194DA are applicable even at the time of releases of loan amount to policyholder as follows - Date of giving Loan by insurance company Amount of TDS under section 194DA Before 01.10.2014 No TDS (section 194DA is applicable only from 01.10.2014) During the 01.10.2014 and 31.05.2016 2% of Loan Amount During 01.06.2016 to 31.08.2019 1% of Loan Amount On or after 01.09.2019 Nil (as income comprised in payment by way of loan is zero) Note: No TDS on amount exempt under section 10(10D) . Any payment under policy [ not being a keyman insurance policy or policy covered under section 80DD(3) or section 80DDA(3) ] issued prior to 01.04.2003, is not subject to TDS provisions of section 194DA. Enabling of filing of Form 15G /15H for payment made under life insurance policy [ w.e.f 1st June, 2015 ] where the tax payable on recipient s total income, including the payment made under life insurance, will be nil. The existing provisions of section 197A of the Income-tax Act inter alia provide that tax shall not be deducted, if the recipient of the certain payment on which tax is deductible furnishes to the payer a self-declaration in prescribed Form No. 15G /15H declaring that the tax on his estimated total income of the relevant previous year would be nil. [ Explanatory Notes the Finance Act 2015 ]