The 60-second version
Section 194DA requires insurer to deduct 2% TDS on life insurance policy proceeds not exempt under Section 10(10D) when payable to resident — 20% if no PAN.
10(10D) exempt policies skip 194DA — high-premium policies may not
Section 194DA applies when life insurance maturity proceeds are not exempt under Section 10(10D) — typically policies where premium exceeds 10% of sum assured for policies issued after 1 April 2012.
Insurer deducts 2% TDS at payout — credit in ITR via 26AS.
Benefits lane: Section 194R guide for perquisites from employer.
Insurance payout tax matrix
| Outcome | Tax | TDS |
|---|---|---|
| 10(10D) exempt | Nil | No 194DA |
| Taxable maturity | Slab rate | 194DA 2% |
| Death claim | Exempt | No 194DA |
| ULIP not exempt | Capital gains rules | Verify VDA/IT rules |
Maturity sequence
Check 10(10D)
Premium vs sum assured ratio.
PAN to insurer
Avoid 20% TDS.
Receive net
Gross minus 194DA.
26AS
Verify TDS credit.
ITR
Declare taxable portion if any.
Flow
194DA kit
- Policy bond.
- Premium paid stmt.
- Maturity letter.
- 26AS.
- ITR if taxable.
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Parent policy
Senior parent LIC maturity may still trigger 194DA if 10(10D) fails — plan tax before surrender.
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All LIC exempt?
No — premium >10% sum assured fails 10(10D) for post-2012 policies.
Form 15G?
Generally not for 194DA — insurer deducts at source.
NRI policyholder?
Different rules — Section 195 may apply.
Surrender before maturity?
194DA if proceeds taxable.
TDS excess?
Claim refund in ITR if income below taxable limit.
ULIP 2021 rules?
ULIP gains may fall under capital gains — verify separate from 194DA.
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