Payment in respect of life insurance policy [Section 194DA]

Taxability of sum received under a life insurance policy

Under section 10(10D), any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt subject to fulfillment of conditions specified under the said section.

Consequently, the sum received under a life insurance policy which does not fulfill the conditions specified under section 10(10D) is taxable.

Rate of TDS

For ensuring a proper mechanism for reporting of transactions and collection of tax in respect of sum paid under life insurance policies which are not exempt under section 10(10D), section 194DA provides for deduction of tax at the rate of 5% on the amount of income comprised therein i.e., after deducting the amount of insurance premium paid by the resident assessee from the total sum received.

Threshold limit

Tax deduction is required only if the payment or aggregate payment of under a life insurance policy, including the sum allocated by way of bonus in a financial year to an assessee is ₹1,00,000 or more. This is for alleviating the compliance burden on the small tax payers.

Disclaimer: Although all provisions, notifications and updates, are analyzed in-depth by our team before writing to the public. Any change in detail or information other than fact must be considered a human error. The Guide, Articles, Blogs, FAQ and videos is to provide updated information. Tax matters are always subject to frequent changes hence advisory is only for the benefit of the general public. Hence neither TaxSmooth nor any of its Team members is liable for any consequence that arises on the basis of these write-ups.

CAANKUR KUMAR

FCA, B.COM having 10 Years of Experience the Field of Income Tax and Finance