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Tax Deducted at Source TDS

  2/1/23 9:25 AM

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TDS stands for Tax Deducted at Source and is a tax collection mechanism in India.

It refers to the tax that is deducted at the source of income, rather than being paid by the individual at the time of filing their tax returns. TDS is applicable to various sources of income in India, including life insurance.

The procedure for TDS on life insurance involves the deduction of tax at the time of payment of the premium and the issuance of a TDS certificate to the policyholder. The policyholder can claim a credit for the TDS deducted at the time of filing their tax returns.

What is TDS on Life Insurance in India?

TDS on life insurance refers to the tax that is deducted at the source of the life insurance premium paid by an individual.

As per the Income Tax Act, 1961, TDS is applicable on life insurance premiums if the premium paid in a financial year exceeds 10% of the sum assured.

For example, if the sum assured on a life insurance policy is Rs. 5 lakh and the premium paid in a year is Rs. 50,000, TDS will not be applicable as the premium is less than 10% of the sum assured.

If the premium paid is higher than 10% of the sum assured, TDS will be applicable at the rate of 1% on the excess amount.

What are the exemptions from TDS on Life Insurance in India?

There are certain exemptions from TDS on life insurance premiums in India. These include:

  • Premiums paid on policies taken for the purpose of providing insurance to employees under a statutory requirement.
  • Premiums paid on policies taken for the purpose of providing insurance to employees as a part of a contractual obligation.
  • Premiums paid on policies taken for the purpose of providing insurance to employees under a scheme approved by the Central Government or any other specified authority.

What is the Procedure for TDS on Life Insurance?

The procedure for TDS on life insurance premiums in India is as follows:

  • The insurance company deducts TDS at the time of payment of the premium.
  • The insurance company issues a TDS certificate, known as Form 16B, to the policyholder.
  • The policyholder can claim a credit for the TDS deducted at the time of filing their tax returns.

What is Form 15G and 15H?

Form 15G and Form 15H are forms that can be submitted to companies to request that no Tax Deducted at Source (TDS) be deducted from certain types of income. These forms can be used by individuals who have a low or no tax liability and do not want TDS to be deducted. Form 15G is for individuals below the age of 60, while Form 15H is for individuals who are 60 years or older.

The forms need to be filled out and submitted to the company or institution that is making the payment, such as a bank or insurance company. It's important to note that these forms need to be submitted annually and only in cases where the estimated tax liability for the financial year is zero or is lower than the TDS to be deducted.

What are the Types of Payments where TDS is Deducted?

TDS, or Tax Deducted at Source, is a mechanism for collecting taxes in India. It is applied to various types of payments, including:

  • Salaries
  • Interest payments by banks
  • Commission payments
  • Rent payments
  • Consultation fees
  • Professional fees

However, there are certain types of payments, such as rent and fees to professionals like lawyers and doctors, for which individuals are not required to deduct TDS.

TDS is a form of advance tax, and it is the responsibility of the person or entity making the payment to ensure that it is deposited with the government in a timely manner. For the individual receiving the payment, the TDS that is deducted can be claimed as a tax refund when they file their income tax return (ITR).

The procedure for TDS on life insurance is straightforward and involves the insurance company deducting TDS at the time of payment of the premium, issuing a TDS certificate to the policyholder and allowing the policyholder to claim credit for the TDS deducted at the time of filing their tax returns. Understanding TDS and its implications on life insurance policies is important to ensure compliance with tax laws and to make the most of any tax benefits.

 


Siddhant Dubey - Writer & Photographer

Siddhant works as a freelance content writer who is interested in a wide range of spheres from photography and personal finance to cooking. He is also an aspiring photographer striving to showcase life around him through his vision. 

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