Section 194DA — TDS on Life Insurance Maturity Proceeds 2025-26

Last updated: 3 June 2026

Section 194DA requires life insurance companies (LIC, HDFC Life, SBI Life, etc.) to deduct 5% TDS on the income portion of maturity proceeds when the policy is not exempt under Section 10(10D). The "income portion" is the maturity amount minus the total premiums paid. If proceeds are below ₹1 lakh in the year, no TDS is deducted.

5% TDS

On income/profit portion only (maturity amount minus total premiums paid). Applies only when the policy is NOT exempt under Section 10(10D). Budget 2023 changed the base from gross amount to net income.

When Does Section 194DA Apply?

Section 194DA is triggered when a life insurance company pays maturity proceeds, surrender value, or any other sum under a life insurance policy — but only if the payment is not exempt under Section 10(10D). Two main situations where a policy is NOT exempt:

1. Regular/Endowment Policy (issued on or after April 1, 2012): If the annual premium exceeds 10% of the sum assured at any point, the policy loses its Section 10(10D) exemption. Example: Sum assured ₹5 lakh, annual premium ₹60,000 (12% of SA) — this policy's maturity proceeds are taxable.

2. ULIP (issued on or after February 1, 2021): If the aggregate annual premium on all ULIPs held by you exceeds ₹2.5 lakh per year, the ULIPs above this threshold are not exempt under 10(10D). The maturity proceeds from such ULIPs are treated as capital gains (not other sources) but the insurer still deducts TDS.

Death benefits are always exempt — Section 194DA does not apply to amounts paid to the nominee on the death of the policyholder. Death proceeds are fully exempt under Section 10(10D) regardless of premium-to-sum-assured ratio.

Policy Type — Taxability and TDS Summary

Policy Type	Condition	Taxable / Exempt	TDS Under 194DA
Term Plan — Death Benefit	Any premium level	Exempt (Sec 10(10D))	No TDS
Endowment / Money-back (post Apr 1, 2012)	Premium ≤ 10% of SA	Exempt (Sec 10(10D))	No TDS
Endowment / Money-back (post Apr 1, 2012)	Premium > 10% of SA	Taxable — Other Sources	5% on income portion
ULIP (post Feb 1, 2021)	Annual premium ≤ ₹2.5L (all ULIPs)	Exempt (Sec 10(10D))	No TDS
ULIP (post Feb 1, 2021)	Annual premium > ₹2.5L (all ULIPs)	Taxable — Capital Gains	TDS deducted by insurer
Keyman Insurance Policy	Any	Taxable — Business Income	5% on income portion
Policy issued before Apr 1, 2012	Any premium level	Exempt (Sec 10(10D))	No TDS

How TDS is Calculated Under Section 194DA

Before Finance Act 2023, TDS was deducted at 1% on the gross maturity amount — even if the policy was barely profitable. From FY 2023-24 onward, TDS under Section 194DA is calculated as follows:

Income portion = Maturity Amount received − Total premiums paid over the policy term
TDS = 5% × Income portion

If the income portion is zero or negative (maturity amount is equal to or less than premiums paid), no TDS is deducted. The threshold for applicability: if aggregate proceeds from all life insurance policies from the same insurer in the financial year are less than ₹1 lakh, no TDS is deducted.

How to Claim TDS Credit and Declare in ITR

The TDS deducted by the insurer under Section 194DA is reflected in your Form 26AS and Annual Information Statement (AIS). To claim the TDS credit, you must declare the taxable insurance income in your ITR:

1. Report the income portion (maturity minus premiums) under "Income from Other Sources" (or Capital Gains for taxable ULIPs).
2. The TDS amount appears in Schedule TDS; claim it as TDS credit against your total tax liability.
3. If TDS exceeds your final tax liability, the excess will be refunded by the Income Tax Department.
4. ITR-1 can be used if the insurance income is the only additional income besides salary; otherwise use ITR-2.

Maturity vs Death Benefit — Key Difference

A common source of confusion is the difference between maturity proceeds and death benefits. Death benefits paid to a nominee are always completely exempt under Section 10(10D) — the premium-to-sum-assured ratio does not affect death benefits. Section 194DA applies only to amounts paid to the policyholder (or assignee) on maturity or surrender — not to nominees on the policyholder's death.

Frequently Asked Questions

When is life insurance maturity amount taxable — and when is it exempt?

Life insurance maturity proceeds are exempt under Section 10(10D) if: (a) for policies issued on or after April 1, 2012, the annual premium does not exceed 10% of the sum assured at any point during the policy term; and (b) for ULIPs issued on or after February 1, 2021, the aggregate annual premium across all ULIPs is ₹2.5 lakh or less. If premiums exceed these thresholds, the maturity amount is taxable as income from other sources, and TDS under Section 194DA applies.

Is the TDS rate under Section 194DA 5% or 10%? Has it changed?

The current TDS rate under Section 194DA is 5% — but importantly, the 5% is applied only on the income/profit portion (maturity amount minus total premiums paid), not on the gross maturity amount. This was changed by the Finance Act 2023. Earlier the rate was 1% on the gross maturity amount. The effective tax liability depends on your total income for the year; you may need to pay additional tax or get a refund when filing your ITR.

Does TDS under Section 194DA apply on policy surrender?

Yes. Section 194DA applies not just to maturity proceeds but also to any amount paid on surrender of a life insurance policy, if the policy is not exempt under Section 10(10D). TDS at 5% is deducted by the insurer on the income/profit portion (surrender value minus total premiums paid). If the surrender value is less than or equal to premiums paid, there is no income and hence no TDS.

What is the TDS threshold — when does the insurance company not deduct TDS?

Section 194DA provides that TDS is not deducted if the aggregate maturity/surrender proceeds paid to the same person during the financial year are less than ₹1 lakh. However, this is the threshold for the gross amount (not the income portion). If total proceeds from the insurer to you during the year are below ₹1 lakh, no TDS is deducted regardless of whether the policy is taxable.

How do I declare insurance maturity income in my ITR, and can I claim TDS credit?

Taxable insurance maturity proceeds (where policy is not exempt under 10(10D)) are declared under "Income from Other Sources" in your ITR. Report the full income (maturity amount minus premiums paid) and claim the TDS deducted by the insurer as a credit — it appears in your Form 26AS and AIS. Use ITR-1 or ITR-2 depending on your other income. No separate schedule is needed; just include it in the "Other Sources" section with the insurer name and amount.

Section 10(10D) Insurance Exemption TDS Rate Chart 2025-26 ULIP Taxation Form 26AS Guide ITR-1 Filing Guide

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