Tripathy (Proprietor) (55 Points)
05 June 2016I recently surrendered(Before maturity to avoid annuity) three Unit Linked Pension Policy. The company has given me the exact surrender value without deducting 2% TDS (Note - PAN was updated in all policies from day one). Does that means these policies are covered under section 10(10D) ? The amount I have received is tax free?
Note : Start dates of these policies are 20-Nov-2008,31-Oct-2009,1-Apr-2009 . Policies were surrendered on 30-May-2016.
CA Brijendra Tripathi
(Consultant)
(142 Points)
Replied 21 June 2016
As per section 194DA of the Income Tax Act of 1961, life insurance companies shall now deduct TDS, if the amount paid on your life insurance policy, including bonus, exceeds Rs. 1 lakh in a financial year.
The section states that ‘the 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, (except life insurance policies which are exempted under section 10(10D)) shall deduct TDS, if the amount paid during the financial year exceeds Rs.1 lakh’.
TDS will not be applicable in case of death claim payouts.
TDS U/s 194DA is applicable to:
TDS rate will be applicable as per the prevailing tax laws.
Customer will be given a TDS certificate of tax deducted.
If the policy payout is taxable and the person (non corporate) is non-resident, then effective rate of TDS under section 195 (i.e. 30%)of Income Tax Act will be applicable.
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