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News INCOME TAX

  • Aug 03, 2019
  • Change in TDS rule on insurance to put additional tax burden on single premium plans from Sept 1

    In her first Budget, India’s first woman Finance Minister Nirmala Sitharaman announced that there will be a change in the rule and the rate of tax deducted at source (TDS) on the maturity amount, where the premium amount is more than 10 per cent of the sum assured (more than 20 per cent of sum assured (SA) for policies issued between April 1, 2003 and March 31, 2012). In case of term plans, where premiums are much lower than 10 per cent of the SA, as well as for most of the regular premium endowment plans, the maturity amount is not taxable under the provision of sub-section 10D of section 10 of the Income Tax Act on the ground that the premium is less than the certain percentage of the SA. But in case of single premium policies, the premium is generally much more than 10 or 20 per cent of the SA and hence the maturity amount becomes taxable as per section 194DA of the Act.