New Sec 194DA – Your Life Insurance Benefits now under TDS!

99 thoughts on “New Sec 194DA – Your Life Insurance Benefits now under TDS!”

1. Dear Meenakshi,

   The proceeds from a cash back life insurance policy will be considered as insurance maturity proceeds under Sec. 10(10)(d). These will be completely tax free.

   Since the proceeds are income and not an investment at the maturity stage, the same cannot be considered for the Section 80C deduction.

   For Sec. 80C benefits, premium paid towards a life insurance policy with a cover of 10 times or more of the premium will be eligible.

2. Siddhant, you will need to use the form as per your IT-related status.

   Whatever TDS is already paid can be adjusted against balance tax payable or claimed as refund, as the case may be.

3. Thanks for this information, Chetan. It will really help our readers.

4. Sorry for the delay in the response, Mr. Rao.

   In our view, only the gain is taxed (i.e. what you received minus what you paid). What you have paid is already taxed (through income tax).

5. I had taken sbilife shubhnivesh in 2011 and i paid Rs.50000 for five years and in 2016 igot back the maturity amount to my account about Rs.263800. Tds was cut about 1% of the total amount as shown in 26a. Now while filing ITR, my tax consultant says i should pay 30% of 263800 ( total amount received) But i say that only 30% of Rs.13800 ( total gain on the policy) is to be paid by me . Please help me in resolving this issue at the earliest. If possible please reply immediately so that i can file the return today.

6. A while back I have got an official mail from LIC stating the policy New Jeevan Dhara is Tax free.The reply was from Manager Claims.It was in response to my seeking a written clarification.

7. Is ITR1 the correct form for income under 194DA ?
   In the ITR1 form, where should such income be mentioned ?
   Note: A TDS has already been deducted at 1% by Life Insurance company before paying out the money.

8. TDS rule is effected by life insurance companies irrespective of whether there is profit or loss. You need to claim this as a loss and hence no tax is payable. The TDS already paid can be set off or claimed as a return.

9. Thanks sir

10. Madhavi, please consider SA as 2 Lakhs. Rider Sum Assured cannot be added for this purpose.

11. Sir, partial withdrawal of 2L done in March 2017. Premium was 30K and benefit of policy death benefit 2L, accident benefit 2L. This 30k paid every year for 11 years starting December 2005. For premium ratio should we consider 2L or 4L . Ratio would be either 15% or 7.5 %. Thanks

12. It depends on the annual year in which it was withdrawn. If the SA: Premium ratio was maintained throughout the year then no tax is payable. If not, you will need to pay tax on the gains.

13. Perfect. Thanks for sharing, Chetan!

14. I had a discussion with the LIC manager he says the option I chose was 3, wherein I have commuted my full policy, which was allowed when the policy was issued back in 2001.after 2002 this changed.

    I have read this on another website replied by a CA Mr Paras Bafna. specific to New Jeevan Dhara

    1. The amount of commutation of pension is being received from a fund. The income of the fund is exempt under section 10(23AAB).

    2. The option of 100% commutation was allowed by the fund referred here in above at the time of issuance of the policy.

    3. Section10(10A) is the relevant section dealing with the commutation of pension and taxability of commuted pension.

    4. Clause (iii) of sub section (10A) of Section 10 specifically exempts any payment in commutation of pension of pension received from a fund under clause (23AAB) of Section 10.

    5. Hence in my opinion the full commutation value, which is being paid by the fund mentioned in para (4) above, is not taxable in the hands of the recipient.
    6. Further, Section 10(10D) makes any sum received under a life insurance policy exempt except certain exceptions. The receipt in question is also not covered by the exceptions. Hence the amount received under the life insurance policy is exempt.

15. That rule is applicable to only life insurance policies and not pension plans, because pension plans do not have a Sum Assured.

16. In the policy New Jeevan Dhara there was no option to commute any portion. No TDS was deducted.I am made to understand that all taxable policies TDS needs to be deducted for more than one lakh thos payment was made in October 2016.

17. Chetan, New Jeevan Dhara is NOT a life insurance plan, it is a pension plan. Pension plan payouts are not tax free except the commuted part which cannot be more than 1/3 of the accumulated corpus. In all probability, the amount that you received might be the commuted benefit and if that is indeed the case, it would be tax free.

18. There is no mention od sum insured on the policy neither was TDS deducted.When I had purchased the New Jeevan Dhara policy in July 2001, I was told if the period is more than 10 years the lump sump shall be tax free

19. What was the Sum Assured of your policy?

20. I had taken a single premium LIC Jeevan Dhara Policy in July 2001 . the amount paid was 21,600/- maturity received is Rs.1,01,550/- in the last year in October 2016. LIC told me only taxable policies TDS shall be deducted and this proceeds are tax free.No TDS was deducted.
    Now my accountant is not clear.
    I shall be grateful if someone can clarify in this regard.

21. Hi Paras, you need to show the gains, i.e. excess received over the sum of premiums paid, as income in the year in which it has come. Show it as other income. Take the advantage of TDS already paid when calculating the total tax payable for the year.

22. Certain Life Insurance Policies in which the annual premium paid is more than 10% of sum assured are now not eligible for tax exemption u/s 10(10D) and accordingly the sum received against them is taxable and simultaneously the insurer is required to make a TDS u/s 194DA. My question is that as to where to show such income in the return of income. Thanks

23. Paras, the question is unclear. Please share in detail.

24. In the return of income here to fill up the income of the nature on which TDS has been made u/s 194DA ? Please guide. Thanks

25. The ENTIRE proceeds from a pension plan are taxable in the year it it received. So the surrendered amount will be added to your income for the year in which it was received.

    Please check with your tax consultant for any other dependencies that might be there.

26. sir, I had one policy of Bharti-axa Dream life pension regular. i invested 20000/- per annum for 9 years and surrendered the policy. I was paid rs 319000. I put total Rs 180000. what will be the taxable amount. Or whole amount is tax free ? pl advice.

27. For the second part, you need to pay tax only on the gains, i.e 540,000 minus total premiums paid.

28. Under normal circumstances, for policies issued on or after April 1, 2012, the exemptions under 80C and 10(10d) are available only if the premium amount in any financial year does not exceed 10 per cent of the actual capital sum assured.

    So you need to pay for both because you are neither eligible for 80C or for 10(10d).

29. Dear sir,
    I had opted for hdfc life sampoorn samridhi insurance plan for 5 yrs. this February 2017, I completed 5 yrs and was paid the amount in my bank. The details
    Policy name.. hdfc life sampoorn Samridhi insurance plan
    Policy term .. 5 yrs
    Premium paid.. 1lac /year
    Sum assured .. 3 lac 34 000
    Amount received after 5 yrs including bonuses … 540,000
    So clearly my sum assured to premium ration seems to be unsuitable to get benefit under 10d..but I used to take rebate on the premium every year under 80C ..
    So now I just want to know how much tax I am supposed to file on this…on 40 thousand which I got extra or on the whole 540,000 I paid for 5 yrs..
    Thanks
    Tegbir

30. ICICI Prulife LifeTime is a ULIP – SA:Premium is >10. Surrender value after 5 years is 100% of fund value. No tax on surrender value.

    ICICI Prulife SmartKid is an anticipated endowment – SA:Premium is <10. Surrender value will be much lower than the premiums you have paid. We suggest you don't surrender this policy. If you do, whatever little you get will also be taxable, further increasing your losses. In the worst case, convert it into a paid up policy so that no further premium needs to be paid.

31. Yes, the TDS can be refunded if it is not due. You can ask for it when filing your annual return.

32. If applicable, TDS rates depend on whether you have declared your PAN at the time of buying – 2% if you have, 20% if you have not.

33. Please consult a tax practitioner to confirm the views below.

    Policy 1 & 2 are both ULIP Pension plans. On surrender of a pension plan, the ENTIRE surrender value is added to your income in the year of receipt and taxed. Also, if you had claimed 80C benefit on premiums paid, it would need to be reversed and tax paid if applicable. Further, 2/3rd of the surrender amount should be used to buy an annuity. Surrender is not recommended unless there is an emergency requirement of funds. Instead, it is better to wait it out till the policy matures and avail of the commutation benefit of 1/3rd + annuity from 2/3rd of the accumulated fund value.

    For Policy 3, the earlier answer still holds because the ratio of sum assured to premium is less than 10. In case you surrender, the gains (maturity amount minus sum of all premiums invested) will be taxed.

34. Dear sir, first of all I would like to thank you for your quick response. Sir as per the policy bond no 1 if I surrender the policy after 5 years there will not be any surrender charges so if I surrender now and get one third of the present value I.e Rs 1 lakh, will it be tax free and the pension on 2/3rd part of annuity will be taxable or not

    In the policy no. 2 I have paid all the three premiums so if I surrender it now I.e before maturity will only gain part (Rs. 1 Lakh) be taxable or the tax will be charged on the total present value which is 4 lakhs

    In policy no. 3 if I surrender it now i.e before maturity , will only the gain part ( 2 lakhs ) be taxable or the tax will be charged on its whole present value I.e Rs. 7 Lakhs.

    I hope the matter is clear to you . Please give your valuable advice

35. Dear Mr. Navin,

    1 & 2 – both being Pension plans – entire 1/3rd of the value of the fund can be commuted, i.e. it can be withdrawn tax-free under Section10(10A)(iii).

    3. Pinnacle Super SP is also a ULIP, but not a pension plan. In your case, the ratio of Sum Assured to Premium is 6.25/5 = 1.25, i.e. less than 10. Hence the gains from your investment are taxable. When the policy matures after 10 years, calculate tax by adding gains (maturity amount minus sum of all premiums invested) to your total income in the year of maturity. (Note : Entire tax could have been avoided if you had chosen the 500% Sum Assured benefit option which was available in this plan, however your mortality charges would be higher, thereby reducing returns marginally.)

    Sir, please let us know if you need any further help.

36. Both are unit-linked policies and the fund that you are invested in does not matter. Stay invested for the entire period of the policy (or at least 15 years in case of Life Stage Wealth) so as to derive maximum benefit from the policies.

    If the ratio of Sum Assured to Annual Premium is more than 10 for both plans, no need to worry – you will get the maturity amount tax free under Section 10(10d). In case you do a top-up in a particular year, ensure that the ratio is still maintained for that year, so that the benefit is tax-free.

37. I am holding the ICICI Smart Kid new unit linked RP and ICICI life stage wealth policy,
    please lets us the know, whether it is going to be tax after maturity amount receiving from these policies.
    currently these policy running under equity fund of flexi growth II fund and opportunities fund
    thanks
    Nanjappa

38. 1 & 2 : Please share the name of the policy (is it a traditional Pension Plan or a ULIP LifeTime Pension Plan)

    3 – ditto. name of the policy please and the sum assured in the plan.

    cheers.

39. Dear Sir,

    I have 2 pension plans offered by ICICI Pru details of which are as follows:

    Policy 1:
    Instalments: single premium of 2 Lakhs
    Commencement date: 17/03/11
    Maturity date: 17/03/21
    Value as of date: 3 lakhs (1/3rd can be withdrawn after 5 years, rest annuity)

    Question: will the entire 1/3rd withdrawn be taxable?

    Policy 2:
    Instalments: 3 instalments of 1 lakh each (all paid)
    Commencement date: 15/9/10
    Maturity date: 15/9/20
    Value as of date: 4 lakhs

    Question: will the entire 4 lakhs be taxable or will 4 lakhs minus 3 lakhs premium paid be taxable

    Additionally there is the following insurance policy:

    Policy 3:
    Instalments: single premium of 5 lakhs
    Commencement date: 13/4/11
    Maturity date: 13/4/21
    Value as of date: 7 lakhs

    Question: will entire 7 lakhs be taxable if withdrawn today or 7 lakhs minus 5 lakhs?

    Please suggest. Thanks

40. In case the pension policy does offer surrender, the entire surrender value will be added to your annual income and taxed as per your tax slab. Also, you will have to pay back the tax exemptions you would have availed on the premiums paid until now.

41. Rajesh, whether it is a ULIP Pension policy or a traditional one, it can only be commuted or annuitized. Please check the terms & conditions of the policy to understand whether it can be surrendered. In all probability, it cannot be done. So our earlier response will hold even in this case.

42. Surrender value is always LESS than premiums paid. Hence there cannot be a ‘gain’. In fact, there would be a ‘loss’ on premiums paid. In our opinion, there is no question of tax liability in such a scenario.

43. Dear Team thanks for your reply. Just help out to get more clarity what if the client surrender will they have any Tax repurcation on it considering money is paid from NRE account

44. Nope, Rajesh.

    That’s because pension plans do not have a ‘return’. There are only commutation and compulsory annuity. Commutation is limited to one-third of purchase price and is tax free under Section Section 10(10A) iii, clause 23AAB, and annuity received is taxed by adding it to the income in the respective year.

    Good idea to buy a pension plan, but you may want to build a separate fund for it given that all pension funds have compulsory annuity which is not transferable. Let us know if you need any help with that.

    Also hope you have a good term plan to protect your income till retirement. In case you don’t, here’s the MintWise link to do that.

    https://www.mintwise.com/term-insurance-compare

    Hope clear. Good luck, Rajesh.

45. Dear expert just wanted to understand. Section 194DA is it applicable to pension policy taken from an insurance company dated 2010. Money is paid from NRE account will there be still TDS if yes than what percent. Need your opinion on it.

46. Presuming that Sec 194A is applicable based on the criteria mentioned in this article, yes, you will need to add the payout that you received net of all premiums paid. Please check the link below for more clarity.

    https://www.mintwise.com/blog/sec-194da-calculate-taxable-returns/

47. My policy is like this sum assured + bonus= 140000 + 35000 inr

48. Please mention the sum assured of the policy.

49. Edit : Krish, in our view, there would be no such tax implication since the policy was bought before 1st April 2003. We missed that in our earlier comment.

50. Hi Krish,

    Very sorry for the late response. We missed it completely.

    In our view, yes, because 10 times the premium (51486 x10) is less than the sum assured (5 lakhs). When you received the money back, TDS would have been deducted by LIC. First calculate the gains, i.e. whatever you received from LIC (before TDS deduction, loan part to be ignored) minus all premiums paid. Add that to the income in the year that you received it. Tax to be paid as per your eligible slab (take benefit of the 2% TDS already deducted).

    Hope this is clear. Good luck.

51. Did you actually get lesser than you invested? If yes, there is no gain and you can claim the TDS in your returns.

    If you made an overall gain, you need to add the gain amount (i.e. all receipts minus all premiums paid) to your income for the respective year and pay the tax as per your tax slab. While do this, take the benefit of the TDS already paid, i.e. Rs. 1,266 and pay or claim refund accordingly.

52. I have taken a Jeevan Anand policy for 7 years with Premium of Rs.20,700/- yearly for a sum assured Rs.1 lacs . Now it matured with Rs.1,26,600/- and TDS deducted Rs.1,266/- My total premium payment amounts to Rs. 1,44,900/- ! Will there be any further Tax liability on this maturity value ?

53. 1. 80C – applicable to the extent of 10% of Sum Assured, i.e. 50k per year
    2. No, only the gains from the investment (i.e. maturity amount minus all premiums paid) will be taxable.

54. I am 26 yrs, I have taken a SBI LIFE insurance policy 2014 Dec. Sum Assured 500000. And I am paying 21000 per quarter. Yearly 84000. And tenure is 7 yrs from 2014 dec. Maturity amount will be 1000000. I would like to know can I get tax exception from 80c and the maturity amount that I will get after 5 yrs will be taxable?

55. 1. Amount Received (before TDS deduction) – premiums paid till date if it is the first receipt from the policy (both in year of receipt)
    2. Calculate tax slab based on salary income + above income + any other income
    3. Calculate total tax payable
    4. Deduct TDS already paid and pay the rest.

    We strongly recommend you also confirm this with your tax consultant.

56. Dear Sir,
    I earning is 15lac p.a , but my policy issue date Oct 2012, premium 253000, s.a 16lac , now this year I am receiving 3lac money back ,2% tds already dedicated,
    So how much tax I will paid in my it ,

57. Pulak, you may also refer to this new article for details on how to calculate taxable income for policies under Sec 194DA.

    https://www.mintwise.com/blog/sec-194da-calculate-taxable-returns/

58. Rajesh, you may also refer to this new article for details on how to calculate taxable income for policies under Sec 194DA.

    https://www.mintwise.com/blog/sec-194da-calculate-taxable-returns/

59. Mukeshbhai, you may also refer to this new article for details on how to calculate taxable income for policies under Sec 194DA.

    https://www.mintwise.com/blog/sec-194da-calculate-taxable-returns/

60. Mr. Venkitakrishnan KV, you may also refer to this new article for details on how to calculate taxable income for policies under Sec 194DA.

    https://www.mintwise.com/blog/sec-194da-calculate-taxable-returns/

61. Varun, you may also refer to this new article for details on how to calculate taxable income for policies under Sec 194DA.

    https://www.mintwise.com/blog/sec-194da-calculate-taxable-returns/

62. Thanks for your inputs, Mr. Singh.

63. Dear Varun section 194DA has given instructions to insurance companies to deduct tds and no instructions given to tax payer. For tax payer circular 7/2003 dated 5.9.2003 point no.10 clearly says only net gains (excluding the premium paid by assessee) to be clubbed in taxable income for such type of policies.

64. Section 194DA is instruction to insurance companies only to deduct tax. No instruction for tax payer. For tax payer circular 7/2003 will apply that is net gains to be clubbed in taxable income

65. Please check circular of income tax 7/2003 of 5.9.2003 point no.10. It clearly says net gain only to be clubbed in total income.

66. Thanks for your comments, Mr. Sharma. Appreciate it. We will indeed try to find out more details about it although we are not experts on taxation. In the meanwhile, you are free to post your valuable advice on this topic.

67. Hello..
    Isn’t it strange that an extremely professional forum like yours is depending upon a definition used by LIC. We expect you to interpret rules or take clarification from IRDA or CBDT in doubtful cases. If LIC is interpreting the word ‘Payable’ as ‘Paid’ i am sure you cannot (and should not) agree with their interpretation (unless it is backed up with some authority or judgement). Will it not be correct to seek clarification from IRDA/CBDT/MoF…

    Regards

68. Dear Varun,

    Please see the thread of comments for the query by Rajesh Shrivastava. Your issue seems to be very similar.

    We recommend strongly that you also consult your taxation advisor before taking a final decision on this.

69. Dear sir
    I would like to have a query answered by you as I am in a dilemma regarding my tax liability under this section. The maturity amount of an lic policy was Rs. 2194000 and tds @ 2% was deducted and the balance amount was transfered to my account. The premium paid was in 6 yearly instalments starting from 2005 to 2010 of an amount Rs. 259860/-.
    Now what is the procedure to calculate my income for the financial year. Will the entire amount of maturity will be added to my income or only the gain incurred will be added to my income.

    Thanking you

    Varun Jain

70. Thanks, Mr. Gupta. For the benefit of all readers, it would be good if you could illustrate this with an example showing premiums paid, returned amount (with a loss), and the year of receipt and maturity.

71. Alternatively, don’t include money back in the year of receipt as policy proceeds less premium is in minus and get refund of tds. But in the year of maturity you have to include all SBs paid earlier in maturity then deduct single premium to arrive at the taxable amount in the year of maturity.

72. We are using the definition as used by LIC since 2014 as per the Finance Act 2014. If you have a clearer communication on that, do share it here please.

73. CALL ON ME 9XXXXXXXX6

74. It includes top ups because it is defined that way.

75. how does top ups fall within the definition of premium payable??? payable means something that needs to be paid compulsorily
    …

76. Dear Sir,

    In our view, no tax can be levied on (a) already taxed income and (b) loss from an investment. So no tax is payable in your case and you can claim a tax return on the TDS amount.

    Unfortunately there are only views but no clear answer on this. And this has happened because the law does not dive into the details and is not comprehensive. Therefore, you might want to take a view from your tax consultant on this matter.

    Thanks.

77. Dear Sir,

    This is regarding New Sec 194DA – Life Insurance TDS!

    Please clarify my below query and kindly advice.

    I have invested Rs.125000/- (62500×2) in a traditional life insurance policy which doesn’t qualifies for 10(10)d. I haven’t filed for tax excemption for Rs.125000/-. After three years when I surrendered it I got only Rs.110000/- it incurred a loss of Rs.15000/-.
    By surprise tds deducted for whole amount Rs.2200/-, i.e, 2% of 110000/-. Also in my tds certificate the entire surrender amount of Rs. 110000/- shown as my income. Now my income slab has gone up because of it. On loss on investment how can insurance companies can deduct tds. After deducting tds iam again (twice) paying tax for my hard earned money up on filing returns. Please advice me how to file returns without affecting my current slab in this situation.

    Thanks in advance. .

78. Dear Mukeshbhai,

    We understand your situation completely. Please note our views. And before you read further, please note that we have nothing in favor of or against any company including LIC.

    1. Your policy is definitely subject to Sec 194DA since Sum Assured is not at least 10 times the annual premium. TDS rate is 2% since you would have submitted your PAN.

    2. LIC has not breached any contract – they have paid you the installment after deducting TDS which was introduced by the Govt. Please note that the Govt decides tax laws and they can change it at any time. This was one such change and LIC has to also abide by those rules. This would work in the same way even if it was some other insurance company instead of LIC.

    3. Yes, in our view, tax is payable on the installment amount. The installment income should be added to your income and depending on applicable slab, tax needs to be computed and paid. TDS deducted already can be reduced before paying the taxes.

    4. When you receive the final installment (which will include single premium amount + loyalty bonus + any other bonuses if declared by LIC), deduct the single premium amount already paid and compute tax by adding only on the balance amount to your income in that year, at rates applicable for you in that year.

    While we understand that this is something you would not have expected when making the Single Premium investment, remember that as per the new rules, tax-free treatment for any benefit except death benefit for life insurance policies is available only wherein Sum Assured is at least 10 times the annual premium.

    We recommend strongly that you also consult your taxation advisor before taking a final decision on this.

79. From : Mukesh Gurjar

    I have single premium ”Vima Bachat policy” Of Rs 7,77,310 /- with effect from Dt. 26-6-2012. Policy number is 836462309 with sum ensured Rs 10,00,000/- it’s mature after 15 year ie in 26-6-2027. as per condition of policy, LIC has to release 15% of sum ensured in every 3- year as money back installment. ie 1,50,000/- in 2015, 1,50,000/-* in 2018, 1,50,000/- in 2021, 1,50,000/- in 2024 and lastly in 2027 Rs 7,77.310+ Loyalty addition. I received Rs 1,47,000 /- after deducting 2% TDS Rs 3000/- in 2015 under U/S 194DA. Now, I fall in 20% tax slab. Should 1,50.000/- will be counted in my income? if so I have to pay other 27,000/- Income-tax in every 3 year.

    So far I know, i took policy not deposited money in interest in LIC. No any condition in my policy to give me interest. Same way no condition to take TDS on money back installment. Neither specified in policy that money back will be the income counted and added in your annual income nor income occurred will be taxable. I belive that LIC made agreement with me in 26-6-2012 and violating him self. they making breach of confidence. If I know that LIC will differ from his statement, i will never took policy & inverst money in bankin FD. Get regular interest with holding my basic investment witch can be use full me in any time by short call notice ie ,released FD.

    I complained in LIC. All officer are basically agree with me that this is agreement and nothing are indicated about Tax in policy then LIC has to pay tax free amount U/S 10(10D) or so. They have also said me that we have also paid tax free amount to number of policy holders up to 2013. Your policy is before Oct 1, 2014 so you are entitled. but we are servant we can not do any thing.

    Now this is not fare dealing by LIC

    1. I have not violated any term and condition of contract with LIC

    2. Should I pay Rs 27,000/- tax every 3 year ?

    3. why LIC is not understand me that I took policy not invest money as FD on interest.

    4. Now I do not have trust on LIC. They cut what-so ever after 27 year. Even basic amount may considered Taxable while maturity. I want my money back, let me guide please.

80. In our view, Rajesh, no tax is payable in your case. The TDS that you have paid can be adjusted against your overall income tax liability and if there is no other tax payable, you can ask for return. We recommend you also check this with your tax consultant.

81. Sir, what I understand is that my income to be added will be Return Rs 114000- Premium paid Rs 136190=(-)22190.The policy doesn’t fall under section 1(10d).Please explain how to figure it out in the return?

82. Rajesh, your question is becoming fairly common after the arrival of this new section 194DA. We will put up an article on that shortly.

    For the time being, let me explain how it works. Assume you have paid annual premium Rs. 20 x 5 years = Rs. 100 total, and your returns are Rs. 125. Based on the article above, if your policy is eligible for Sec 10(10d), the whole Rs. 125 can be added to your income and deducted again because it is tax-free. So no tax is payable.

    If however, it does not fall under Sec 10(10d) because of the points in this article, then you will get Rs. 122 (assuming Rs. 3 is deducted as TDS) you need to show the gains i.e. 125 – 100 = 25 as income and add it to all your other income. Once tax is calculated overall, reduce Rs. 3 (already paid as TDS) and pay the rest.

    Hope this is clear, Rajesh.

83. I received Rs 114000 for sbi life insurace maturity amount for which I paid Rs 136190 as premium in 5yrs. TDS 2% has already been deducted. It seems the entire maturity amount will be taken as in income, so I’ll have to pay additional 30% on it. I fact as compared to the premiums paid, I am already at a loss. Please explain it what income is to be added to my salary?

84. Dear Pulak,

    Our mistake – we did not interpret your query comprehensively. Apologies.

    You need to DEDUCT the premium paid from the benefits and show only the rest as income. e.g. if your investment was Rs. 100 and maturity amount was Rs. 125, your income would be Rs. 25 and it will get added to the rest of your income. Once overall tax is calculated, deduct the TDS paid on the Rs. 25 by the insurance company and pay the balance. We suggest you get in touch with a tax consultant if you want to be dead sure.

    The form you need to fill will depend on your personal status. The ITR-2 Form is the Income Tax Return form for Individuals and HUFs who do not have any income from Business or Profession. The due date of filing the ITR-2 form for the Financial Year 2015-16 is 31 July, 2016 .

    Just to add, a Single Premium plan may not give you adequate life cover – typically 125% of premium. Do review your life cover and if it is less than 20 times your income + liabilities (like home loan) then use a term insurance plan to protect your family.

    Hope this helps, Pulak. If there anything further to ask, do not hesitate.

    Sorry once again.

85. Sir
    I know that my policy was not tax exempted. It was a single premium policy.
    But the total maturity amount includes premium paid amount which is investment and bonus. If I pay tax on total maturity amount, then I am paying tax twice on the premium amount i.e. when I have earned that amount prior to investment to LIC. Then again when I am getting the same amount from LIC. What I think is I have to pay tax on income only. If I am correct please tell me how to deduct premium amount from total maturity amount. I have to fill up ITR 2. If I am not correct please correct me.
    Regards
    Pulak

86. Hi Pulak, the fact that LIC has deducted TDS means that your policy is subject to Sec 194DA.

    What you need to do is show the entire maturity proceeds as income and calculate tax as per applicable slab. When paying the final taxes, reduce it by the amount of TDS already paid. That’s it.

87. Please let me know how to reflect income only while paying further tax after tds deduction by lic of India. The maturity proceeds also include premium i.e. invested amount.

88. Ketan, no it is still in force. What you might have heard is that IRDAI is going to represent to the Finance Ministry about removing this rule. The waiver is just a proposal at this time. So the original rule in the article above still continues. Do note.

89. Recently I heard that this is now removed. Is that true?

90. Sankar, the exemption of tax on death claims is provided in Sec 10(10d) itself. The conditions are not applicable in that case.

    Term Plans are included in the Section because of the following reasons.
    (1) There are Return of Premium Term Plans which can have benefits other than death claim, i.e,. a maturity benefit of return of premiums.
    (2) In certain rare cases, e.g. high age, hazardous occupation extra premium and short tenors, there could be cases of term plans NOT meeting the 1:10 ratio.

    In your case, you will not be impacted at all when you buy a term plan. Just go ahead, Sankar.

91. Sankar, the exemption of tax on death claims is provided in Sec 10(10d) itself. The conditions are not applicable in that case.

    Term Plans are included in the Section because of the following reasons.
    (1) There are Return of Premium Term Plans which can have benefits other than death claim, i.e,. a maturity benefit of return of premiums.
    (2) In certain rare cases, e.g. high age, hazardous occupation extra premium and short tenors, there could be cases of term plans NOT meeting the 1:10 ratio.

    In your case, you will not be impacted at all when you buy a term plan. Just go ahead, Sankar.

92. Thanks a lot for the information. I am not sure if I understand it correctly. According to section 10 (10D) any amount we get from insurance policies including term plan will not be taxed provided the 3 conditions are satisfied. But you also state that the conditions are not applicable for death claims.

    My question is in term insurance claim is made only in the event of death, so otherwise there is no payout. So why should section 10(10D) include term plan. Another question I had is term insurance are very cheap compared to endowment, so I I do not see a case where premium paid can be more than 10% of sum assured. I do not what I am missing here, but would be very helpful if you can answer my queries. I am in the process of buying a term plan, so wanted to understand the implications.I plan to buy for 80 lakhs um assured with premium amounting to Rs 9,000. Will I be impacted? I am in 20% tax slab. Thanks.

93. Thanks a lot for the information. I am not sure if I understand it correctly. According to section 10 (10D) any amount we get from insurance policies including term plan will not be taxed provided the 3 conditions are satisfied. But you also state that the conditions are not applicable for death claims.

    My question is in term insurance claim is made only in the event of death, so otherwise there is no payout. So why should section 10(10D) include term plan. Another question I had is term insurance are very cheap compared to endowment, so I I do not see a case where premium paid can be more than 10% of sum assured. I do not what I am missing here, but would be very helpful if you can answer my queries. I am in the process of buying a term plan, so wanted to understand the implications.I plan to buy for 80 lakhs um assured with premium amounting to Rs 9,000. Will I be impacted? I am in 20% tax slab. Thanks.

94. Nicely explained. thanks.

95. Nicely explained. thanks.

96. For those who have been avoiding taxes that were actually due, this change means that they can be tracked, so for their own benefit, it is better that it is accounted and taxes are paid promptly.

97. For those who have been avoiding taxes that were actually due, this change means that they can be tracked, so for their own benefit, it is better that it is accounted and paid promptly.

98. Thanks for the important information. This means that I have to pay more as tàxes.

99. Thanks for the important information. This means that I have to pay more as tàxes.

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