# Section 194DA - TDS on Sum under a Life Insurance Policy

## Trigger

Applies to payment of any sum under a Life Insurance Policy (including bonus) which does NOT fulfil the exemption conditions of section 10(10D).

## Who Deducts

Any person responsible for paying any sum under a LIP, including bonus.

## Payee

Any resident.

## Threshold

Amount or aggregate amount ≥ ₹ 1,00,000 in a F.Y.

## Rate of TDS

2% of the income comprised therein (i.e., on income portion, NOT the gross sum).

> Important: TDS is on the income component = Maturity proceeds minus premiums paid.

## When to Deduct

At the time of payment.

## Linkage with Sec 10(10D)

If the LIP satisfies 10(10D), the maturity proceeds are exempt and no TDS arises. Where 10(10D) exemption fails (e.g., premium > prescribed % of sum assured), 194DA kicks in.

⚠️ Common exam mistakes

Computing TDS on the gross maturity sum instead of the income portion (maturity minus premiums)
Deducting TDS even where the policy is exempt u/s 10(10D)
Forgetting the ₹ 1,00,000 threshold — no TDS if aggregate < ₹ 1 lakh

Bare-Act text Section 194DA · Income-tax Act, 1961 · click to expand

Any person responsible for paying to a resident any sum under a life insurance policy, including the sum allocated by way of bonus on such policy, other than the amount not includible in the total income under clause (10D) of section 10, shall, at the time of payment, deduct income-tax @ 2% on the income comprised therein.

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Section 194DA - TDS on Sum under a Life Insurance Policy

Worked example

⚠️ Common exam mistakes