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194DA w.e.f 1st sep 19

07 September 2019

Hello everyone,

since this section has been amended now

and now deductor have to deduct tax at source at 5% of ( maturity amount- total premium paid in respect of policy)

my question is what amount shall be taxable in " income under the head other sources" at the time of maturity of above life insurance policy??

thanks
pranav

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5 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177852 Points)
Replied 07 September 2019

Taxability of surrender/maturity amount is decided over the available deduction u/s. 10(10D) of the IT act..

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Kapadia Pravin (17259 Points)
Replied 07 September 2019

Taxability will be tax free if falling under10(10D) provisions.
Other policies such as ELSS ULIP etc taxation will depend upon terms and conditions of the policies.

Assessee can claim credit of TDS deduction under TDS Schedule

Pranav Aggarwal (525 Points)
Replied 07 September 2019

but pravin there is a provision in income tax act that if u paid premium paid more than 10% of sum assured.

then 80C benefit will be restricted to 10% of sum assured only.
and maturity amount will be taxable and not exempt.

and because maturity amount is taxable and if maturity amount exceeds 1,00,000 payer need to deduct TDS as per provisions of 194DA.

pls correct me if am wring any where.

Kapadia Pravin (17259 Points)
Replied 07 September 2019

The query is not related to 80C deduction.

Finance Minister Nirmala Sitharaman in the budget 2019 has proposed to deduct 5% tax on net income portion of taxable life insurance proceeds instead of the current TDS of 1% of the gross maturity payout under the policy.

FM in the budget proposes: "TDS on non exempt portion of life insurance pay-out on net basis. Under section 194DA of the Act, a person is obliged to deduct tax at source, if it pays any sum to a resident under a life insurance policy, which is not exempt under sub-section (10D) of section 10. The present requirement is to deduct tax at the rate of one per cent of such sum at the time of payment. Several concerns have been expressed that deducting tax on gross amount creates difficulties to an assesse who otherwise has to pay tax on net income (i.e after deducting the amount of insurance premium paid by him from the total sum received)."

"From the point of views of tax administration as well, it is preferable to deduct tax on net income so that the income as per TDS return of the deductor can be matched automatically with the return of income filed by the assessee. The person who is paying a sum to a resident under a life insurance policy is aware of the amount of insurance premium paid by the assessee. Hence, it is proposed to provide for tax deduction at source at the rate of five percent on income component of the sum paid by the person. This amendment shall be effective from 1st September, 2019

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 23 August 2020

It's not exempt...if premium is more than 10%/20% as the case may be of sum assured.

Incase an assessee receives LIC maturity which is not exempt u/s 10(10D), (as in your case ) than [ Maturity Amount less all Premium paid ] by you is taxable as income from other sources. and you can claim TDS which is deducted, in your IT return.

So, Total/Gross amount is not taxable, only Income portion is taxable.(i.e Maturity amount-all premium paid)