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Tax Insights : TDS Applicable on Life Insurance

Pay-out Under Section 194 of Income Tax Act 1961!

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins

As per the new section introduced in Income tax act 1961, people would get highly affected because of high TDS (Tax deducted at source) on their sum insured benefit.

Section 194 DA under Income tax act 1961 says that the policies that are not exempted under section 10 10 (D) would be affected by the deduction of TDS on the pay-out. This section came effective from October 1st, 2014.

The rate of TDS would be @ 2% on any pay outs that exceeds Rs.1,00,000 per year and @ 20% for those who are not having their PAN Cards.

Section 10 10 (D) of Income tax act 1961, specifies that any ULIP policy bought after April 2012, would be exempted from tax if the premiums paid in any of the year are less than 10% of sum insured. All the policies that are bought from April 2003 to March 31st 2012, the exemptions were granted to those, whose premium does not exceeds 20% of sum insured.

But, the concept of tax deducted at source for those policies pay outs, whose premium in any year exceeds 10% of sum insured, would adversely affect some class of people like:

  • Single premium payer as the amount of single premium would in most of the cases exceeds 10% of sum insured.
  • People who have chosen additional riders as the total premium in most of the cases would exceed 10% of sum insured.
  • Older people whose premium would be really high would mostly exceeds 10% of the sum insured.
  • People living in small towns or villages, who do not have PAN cards with them.

Such deduction of TDS would make your pay-out sum lesser and even lesser for those who do not have PAN cards.

Actionable to avoid TDS:

1. Please ensure you have made your PAN CARD & update the details with your Insurance Company

2. Buy regular premium policies & ensure that the Sum Assured is greater than 10 times of your Annual Premium

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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.

The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on carefully before concluding a sale.


*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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