Section 194DA of ITA, 1961 : Section 194Da: Payment In Respect Of Life Insurance Policy

Explanation using Example

Imagine Mr. Sharma has a life insurance policy and the policy matures, with the insurance company ready to pay out the sum assured along with a bonus. The total amount comes to ₹150,000. According to Section 194DA of the Income-tax Act, 1961, the insurance company, before making the payment to Mr. Sharma, is required to deduct tax at the rate of 1% on the payout because the amount exceeds the threshold of ₹100,000. Therefore, the insurance company will deduct ₹1,500 (1% of ₹150,000) as TDS and pay the remaining ₹148,500 to Mr. Sharma.