Tds on insurance maturity proceedings

I am a Salary Tax payer. I invested in HDFC' s Insurance Policy @ 25000/- p.a., for 5 years commencing from March 2012 to march 2016. my total contribution is Rs.125000/- and the total maturity amount received is Rs.132517.68 which includes my contribution of Rs.125000/-. now they have deducted TDS @ 1% on total maturity amount to the extent of Rs.1325/- and paid the balance amount. Now the form 26AS/16A will show Rs.132517.68 as gross amount on which TDS Rs.1325/- is deducted. If I show the maturity amount of Rs.132517.68 as other income and tds tereon in ITR 2, it will increase my tax liability further. Whether it is correct? If it correct, it clearly indicates the system of looting by our Govt. Taxing of already taxed income, that too after a long period on such income that the individual has no right to touch is really meaningless. How the Indian CA's firms are supporting such proposals of the Govt. If Maturity proceedings in excess of the individual's contributions are taxable there is no question all. reply and opinions in this regard are highly appreciated. I am a Salary Tax payer. I invested in HDFC' s Insurance Policy @ 25000/- p.a., for 5 years commencing from March 2012 to march 2016. my total contribution is Rs.125000/- and the total maturity amount received is Rs.132517.68 which includes my contribution of Rs.125000/-. now they have deducted TDS @ 1% on total maturity amount to the extent of Rs.1325/- and paid the balance amount. Now the form 26AS/16A will show Rs.132517.68 as gross amount on which TDS Rs.1325/- is deducted. If I show the maturity amount of Rs.132517.68 as other income and tds tereon in ITR 2, it will increase my tax liability further. Whether it is correct? If it correct, it clearly indicates the system of looting by our Govt. Taxing of already taxed income, that too after a long period on such income that the individual has no right to touch is really meaningless. How the Indian CA's firms are supporting such proposals of the Govt. If Maturity proceedings in excess of the individual's contributions are taxable there is no question all. reply and opinions in this regard are highly appreciated. I am a Salary Tax payer. I invested in HDFC' s Insurance Policy @ 25000/- p.a., for 5 years commencing from March 2012 to march 2016. my total contribution is Rs.125000/- and the total maturity amount received is Rs.132517.68 which includes my contribution of Rs.125000/-. now they have deducted TDS @ 1% on total maturity amount to the extent of Rs.1325/- and paid the balance amount. Now the form 26AS/16A will show Rs.132517.68 as gross amount on which TDS Rs.1325/- is deducted. If I show the maturity amount of Rs.132517.68 as other income and tds tereon in ITR 2, it will increase my tax liability further. Whether it is correct? If it correct, it clearly indicates the system of looting by our Govt. Taxing of already taxed income, that too after a long period on such income that the individual has no right to touch is really meaningless. How the Indian CA's firms are supporting such proposals of the Govt. If Maturity proceedings in excess of the individual's contributions are taxable there is no question all. reply and opinions in this regard are highly appreciated.

Exemption u/s 10(10D) comes with rider. All the maturity proceeds of insurance policies are not exempt. In case of policies bought before April 2012, if the premium is more than 20% of the sum insured, then the entire maturity proceeds are taxable. The limit of 20% is reduced to 10% in case of policies bought on or after 01.04.2012.

In your case, the polcy was bought in March 2012 so the limit of premium is 20% of the sum assured. If the premium you are paying is 20% or less of the sum assured/death benefit then you can enjoy the benefit of section 10(10D). Otherwise the entire receipt is taxable and not the excess of receipts over premium paid. Since the insurer had deducted TDS it proves that the premium was more than 20% of the sum assured on your policy.You have not mentioned the SA of your policy. Nevertheless, the entire receipt is taxable. Since the TDS is made at 1% and inclusion of the same Rs. 1,32,517.68/- in your income will increase your tax liability substantially which you have to pay.