Applicability

• Payouts covered: Applies to life insurance payouts like maturity benefits.
• Not covered: Policies that are exempt under Section 10(10D).

TDS rate

• Until September 30, 2024: 5% on the income part of the payout.
• From October 1, 2024: 2% on the income part of the payout.

Threshold

• Limit: TDS applies only if the payout is more than ₹1,00,000 in a year.

Exemptions

• Section 10(10D): Policies under this section are exempt.
• Death benefit: Fully exempt from TDS.
• Small payouts: Payouts below ₹1,00,000 in a year are not subject to TDS.

How income is calculated

• Formula: Income = Payout − Total premiums paid.
• Example: Payout ₹10,00,000 − Premiums ₹7,00,000 = Income ₹3,00,000 → TDS @ 2% = ₹6,000.

Compliance

• Insurer duty: Insurance companies must deduct TDS and deposit it with the government within 30 days from the end of the month.
• Your tax return: You can claim TDS credit when you file your income tax return.

Quick takeaway

Key point: If your payout is taxable and above ₹1,00,000, TDS is taken only on the income part, not the full amount.