What is Section 194DA?
Any person responsible for paying to a resident any sum under a life insurance policy (including the sum allocated by way of bonus) shall deduct the tax at source at the time of payment thereof. However, as per section 10(10D), the following amount received from life insurance company shall not be exempt:
- (a) any sum received under section 80DD or section 80DDA(3) or
- (b) any sum received under a Keyman insurance policy; issued on or after the 1st day of April 2003 but on or before the 1st day of February 2021, if the amount payable exceeds 20% of the actual capital sum assured during the term of the policy,
- (c) any sum received under an insurance policy issued on or after the 1st day of April, 2013 if the premium payable in any of the years during the term of the policy exceeds 10% of the actual capital sum assured [Explanation 1 to section 10(10D) for the meaning of “actual capital sum assured” shall have the meaning as assigned to it in section 80C(3A)],
- (d) any sum received from unit linked insurance policy issued on or after 01.02.2021
Explanations to Section 194DA
Further, where the policy, issued on or after the 1st day of April, 2013, is for insurance on the life of any person with a disability or a person with severe disability as referred to in section 80U or suffering from disease or ailment as specified in the rules made under section 80DDB, the provisions of clause (c) mentioned above shall have effect as if, for the words “10%”, the words “15%” had been substituted.
Keyman insurance policy [Explanation 1 to section 10(10D)]
Keyman insurance policy means a life insurance policy taken by a person on the life of another person who is or was the employee of the first-mentioned person at the time of taking such policy and is or was connected in any manner whatsoever with the business of the first-mentioned person. It includes such policy which has been assigned to a person, at any time, during the term of the policy, with or without any consideration.