Is TDS now being deducted on life insurance policies?
All insurance policies including ULIPs, term insurance plans and traditional insurance policies except annuity, pension plans, insurance policy for a disabled dependent and employer sponsored group life insurance will come under the ambit of the Tax Deducted at Source (TDS) rule as per the 2014 finance bill. Most single premium policies are likely to come under the TDS deduction rule unless they offer sum assured that is 10 times the premium. In other words all life insurance policies that are not eligible for tax exemption under Section 10 (10D), will see 2% TDS on the sum paid to the policyholder.
As per the finance bill of 2014, section 194DA of the income tax Act of 1961 would deduct a total of 2% tax at source on the total sum to be paid to the policyholder having a valid and registered PAN number. In case the policyholder does not have a valid PAN which is registered, a total of 20% tax would be deducted at source. All those insurance policyholders who do not have their PAN numbers registered with their insurance service providers need to get their PAN numbers registered to avoid deduction of 20% tax as TDS.
Want to check out Life Insurance plans? Click here.