I have surrendered two Life Insurance Policies (single premium of Rs 100,000/- each) of Shriram Life Insurance Co Ltd in Feb 2017. Details of policies 1) Shri Plus (SP-II) purchased in June 2010 and 2) Shri Plus (SP) purchased in Dec 2009. Out of total proceeds amounts of Rs 147922/- and Rs 165641/- , they deducted Rs 1479/- and 1656 /- towards TDS and deposited balance to my account. I want to know if total proceeds (including premium of Rs 100,000/-, I paid) is taxable? In that case why only 1% income tax was deducted at source, against general practice of 10% deduction?
Hello,
You will have to check your policy documents to check under which category does your insurance fall.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Hi,
As per Section 10(10D) of the Income Tax Act, 1961 the amount of sum assured plus any bonus (i.e. the policy proceeds) paid on maturity or surrender of policy or on death of the insured are completely tax free for the receiver subject to certain conditions.
These policy proceeds will be taxable in the hands of the insured in the following situations:
1. In case of a life insurance policy issued after 1.4.2003 but on or before 31.3.2012 if the premium payable in any year exceeds 20% of the actual sum assured, then the policy proceeds would be taxable in the hands of the insured.
2. For policies issued on or after 1.4.2012, the above mentioned limit of 20% has been changed to 10%.
However, insurance companies will deduct your TDS even if the proceeds are tax free. You have to claim it in your return.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hi,
In most cases of life insurance, amount received on surrender is exempt.
Coming to the rate of TDS, as per section 194DA the rate of tax for the purpose of deduction is 1%.
Trust this clarifies.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LLB
