194 da?

It is calculated on entire proceeds (i.e. 2% of Rs.21 lakhs) including sum allocated by way of bonus. It would be taxable under the head Income from other source.

As per section 194DA of Income Tax Act, 1961, 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, other than the amount not includible in the total income under clause (10D) of section 10, shall, at the time of payment thereof, deduct income-tax thereon at the rate of two per cent

Provided that no deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than one hundred thousand rupees.

Hence, on entire proceeds TDS has been deducted