Investment
Section 194DA of the Income Tax Act: TDS on Life Insurance Policy Payouts Explained
Most life insurance payouts in India are tax-free, but that isn't guaranteed for every policy. If your policy doesn't meet the conditions laid out under the Income Tax Act, the insurer is legally required to deduct tax before the money reaches you. This deduction is governed by Section 194DA of income tax act, and it applies more often than most policyholders realise, especially on investment-linked or high-premium plans.
This guide breaks down what this provision means, who it applies to, the current TDS rate, and how to handle it correctly while filing your income tax return.