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TDS on Life Insurance Policies: Top Things You Should Know About
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Interesting insights about TDS on Life Insurance policies

We usually prepare ourselves for various milestones in life; however, it is similarly critical to be ready for the unforeseen. That is the reason life insurance policies are in every case highly suggested as a fundamental element of each individual’s financial portfolio.

The primary role of life insurance is to provide financial protection to the policyholder and his or her loved ones in case of the policyholder’s unfortunate demise. In addition, life insurance policies also offer tax relief towards the premiums paid for the policy and the benefits received. That is why many of us prefer purchasing life insurance as it ensures financial security.

However, the subject of TDS, as imposed on life insurance policies, could be a tricky one to understand. This frequently prompts the confusion that life insurance coverage is often excluded from any type of tax benefit. Specifically, few realize that Tax Deducted at Source, or TDS, is always exacted at life insurance maturity. To comprehend it in a better way, let us know certain factors about the same:

What is TDS? 

First and foremost, let us understand the idea of Tax Deducted at Source, or TDS. TDS is a type of income tax by which the relevant tax amount is deducted straightforwardly from the full amount payable before the subsequent pay is given to an individual. TDS is usually applicable on salaries, compensations, interests, commissions, and professional charges. The deducted sum eventually gets submitted to the government.

TDS on Life Insurance Policies 

TDS is normally deducted from the maturity amount of the life insurance policy, but it isn’t something similar in all cases. Here are the different provisions and sections that decide the specific TDS relevant to an individual’s life insurance policy:

Exceptions: Under Section 10(10)D of the Income Tax, 1961, specific insurance policies whether they are life insurance or term insurance, are excluded from any type of income tax if: 

  • The insurance policies were issued at the latest 31st March 2012, where the sum assured amount is at least five times the yearly premium paid towards the policy.
  • The insurance policies were given on or after 1st April 2012, where the sum assured is 10 times the yearly premium paid for the policy.


Additionally, there is one more exception under Section 80DDB, if:

The insurance policies are given on or after first April 2013 for the people who are handicapped or experiencing infirmities as indicated by the Income Tax Act, where the premium payable at whatever year surpasses 15% of the actual sum guaranteed.

Deduction of TDS on Life Insurance 

Under Section 10(10D), the exemptions recorded above don’t matter if the life insurance amount surpasses Rs. 1,00,000 in a solitary year for policies exempted from the purview of Section 10(10D). In such a case, the maturity amount will be taxable according to usual.

TDS is deducted on the life insurance maturity amount according to these provisions under Section 194DA:

  • In case the policyholder’s PAN subtleties are accessible and enrolled, TDS is deducted at the rate of 1% of the maturity amount payable to the policyholder.
  • In case the policyholder’s PAN subtleties are not accessible and enrolled, TDS is deducted at a pace of 20% of the maturity amount.


Significant Points to Note 

Aside from the facts about TDS derivations and exemptions, there are a couple of better pointers that are critical to note:

  • It is consistently desirable to keep one’s life insurance policy active for as long a tenure as possible. This helps in protecting your family’s financial necessities and guarantees that you never run out of coverage. It is additionally suggested that the sum assured should be at least 10 times the policyholder’s annual income.
  • Make a point to enlist for and give your PAN card subtleties since it extensively brings down the TDS burden on life insurance.
  • To compute the appropriate TDS, you should incorporate the payable maturity amount into your total income.


Overall, this means that if you fall under any of the referenced deduction brackets, your insurance provider will give you the maturity amount subsequent to deducting the pertinent TDS. As a policyholder, it is significant that you look through the exceptions and ascertain the deducted figure beforehand to keep away from any disarray.

Life insurance policies usually do not attract the implication of TDS. However, if the agreed rules are not fulfilled, the maturity benefit gets taxable. So, it is advised to understand the implication of TDS on your life insurance policy so that you clearly understand the taxation on your policy benefits.

If you are looking for more information about TDS on Life Insurance policies, you may visit iiflinsurance.com or speak to any insurance experts. However, needless to mention that you should know every aspect of life insurance before buying one to avoid any confusion later.

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