Section 194DA of the Income Tax Act, 1961 covers the person making payment to a resident person any sum under the life insurance policy. It is important to note that section 194DA includes the sum allocated by way of bonus.
Rate of TDS under section 194DA : The Deductor, liable to deduct TDS as per provisions of section 194DA of the Income Tax Act, 1961, is required to deduct TDS @ 5%.
-However, from 14/05/2020 the rate reduces to 3.75%.
-In case the PAN is not furnished, the Deductor is liable to deduct TDS at maximum marginal rate i.e. 20%.
Time of deduction of TDS : As per provisions of section 194DA, the Deductor is required to deduct TDS at the time of payment.
Cases wherein TDS is not deductible :
TDS is not deductible in case life insurance policy qualifies under section 10 (10D).
No TDS deductible if the aggregate amount of payment during the financial year is less than INR 1,00,000.
Regards
Compiled by CA Sunil Sakral
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